UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
I.R.S. Employer | ||||||
Commission File Number | Exact name of registrant as specified in its charter | Identification Number | ||||
001-3375 | DOMINION ENERGY SOUTH CAROLINA, INC. | 57-0248695 | ||||
south carolina | ||||||
(State or other jurisdiction of incorporation or organization) | ||||||
400 OTARRE PARKWAY | ||||||
CAYCE, South Carolina | 29033 | |||||
(Address of principal executive offices) | (Zip Code) | |||||
(803) 217-9000 | ||||||
(Registrants’ telephone number) |
Securities registered pursuant to Section 12(b) of the Act:
None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. SCANA Corporation Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). SCANA Corporation Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | Emerging growth company | ☐ | ||
Non-accelerated filer | ☒ | Smaller reporting company | |||||
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Dominion Energy South Carolina, Electric & Gas Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. South Carolina Electric & Gas Company makes no representation as to information relating to SCANA Corporation or its subsidiaries (other than South Carolina Electric & Gas Company and its consolidated affiliates).
Page | ||||||
3 | ||||||
Item 1. | 5 | |||||
Management's Discussion and Analysis of Financial Condition and Results of Operations | 30 | |||||
33 | ||||||
34 | ||||||
34 | ||||||
6. | 35 | |||||
GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text have the meanings set forth below unless the context requires otherwise:
Abbreviation or Acronym | Definition | |
2017 Tax Reform Act | An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (previously known as The Tax Cuts and Jobs Act) enacted on December 22, 2017 | |
ACE Rule | Affordable Clean Energy Rule | |
AOCI | Accumulated other comprehensive income (loss) | |
ARO | Asset retirement obligation | |
BACT | Best available control technology | |
CAA | ||
Clean Air Act | ||
CCR | Coal combustion residual | |
CEO | ||
Chief Executive Officer | ||
CERCLA | Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund | |
CFO | Chief Financial Officer | |
CO2 | Carbon dioxide | |
Consortium | ||
A consortium consisting of | ||
CUA | Capacity Use Area | |
CWA | ||
Clean Water Act | ||
DECG | Carolina Gas Transmission, LLC, (formerly known as Dominion Energy Carolina Gas Transmission, LLC), a subsidiary of Berkshire Hathaway Energy Company effective November 2020 (previously a subsidiary of Dominion Energy) | |
DES | Dominion Energy | |
DESC | The legal entity, Dominion Energy South Carolina, | |
DESS | Dominion Energy Southeast Services, Inc. | |
Dominion Energy | The legal entity, Dominion Energy, Inc., one or more of its consolidated subsidiaries (other than DESC) or operating segments, or the entirety of Dominion Energy, Inc. and its consolidated subsidiaries | |
Dominion Energy South Carolina | Dominion Energy South Carolina operating segment | |
DSM | Demand-side management | |
ELG Rule | Effluent limitations guidelines for the | |
EPA | ||
U.S. Environmental Protection Agency | ||
FERC | ||
Federal Energy Regulatory Commission | ||
FILOT | Fee in lieu of taxes | |
Fuel Company | South Carolina Fuel Company, Inc. | |
GAAP | U.S. generally accepted | |
GENCO | South Carolina Generating Company, Inc. | |
GHG | Greenhouse | |
IAA | ||
Interim Assessment Agreement dated March 28, 2017, as amended, among | ||
MD&A | Management's Discussion and Analysis of | |
MGD | Million gallons per day | |
MGP | Manufactured gas plant | |
NND Project | V. C. Summer Units 2 and 3 nuclear development project under which DESC and Santee Cooper undertook to construct two Westinghouse AP1000 Advanced Passive Safety nuclear units in Jenkinsville, South Carolina | |
NOx | Nitrogen oxide | |
Order 1000 | Order issued by FERC adopting requirements for | |
PGA | Purchased gas adjustment | |
PSD | Prevention of significant deterioration |
Abbreviation or Acronym | Definition | ||
Questar Gas | Questar Gas Company, a wholly-owned subsidiary of Dominion Energy | ||
Reorganization Plan | Modified Second Amended Joint Chapter 11 Plan of Reorganization, filed by Westinghouse | ||
RICO | Racketeer Influenced and Corrupt Organizations Act | ||
ROE | Return on equity | ||
RSA | |||
Natural Gas Rate Stabilization Act | |||
Santee Cooper | South Carolina Public Service Authority | ||
SCANA | The legal entity, SCANA Corporation, one or more of its consolidated subsidiaries (other than DESC) or the | ||
SCANA Combination | Dominion Energy's acquisition of SCANA completed on January 1, 2019 pursuant to the terms of the SCANA Merger Agreement | ||
SCANA Merger Agreement | Agreement and plan of merger entered on January 2, 2018 between Dominion Energy and SCANA | ||
SCANA Merger Approval Order | Final order issued by the South Carolina Commission on December 21, 2018 setting forth its approval of the SCANA Combination | ||
SCDHEC | South Carolina Department of Health and Environmental Control | ||
SCDOR | South Carolina Department of Revenue | ||
SEC | U.S. Securities and Exchange Commission | ||
SEMI | SCANA Energy | Marketing, LLC (formerly known as SCANA Energy Marketing, Inc.), a subsidiary of SCANA through December 2019, and effective December 2019, a subsidiary of Wrangler Retail Gas Holdings, LLC, a partnership between Dominion Energy and Interstate Gas Supply Inc. | |
SO2 | Sulfur dioxide | ||
South Carolina | |||
Public Service Commission of South Carolina | |||
Summer | |||
V. C. Summer | |||
Toshiba | |||
Toshiba Corporation, parent company of | |||
Toshiba Settlement | Settlement Agreement dated as of July 27, 2017, by and among Toshiba, | ||
VIE | Variable interest entity | ||
Virginia Power | The legal entity, Virginia Electric and Power Company, a wholly-owned subsidiary of Dominion Energy, one or more of its consolidated subsidiaries or operating segment, or the entirety of Virginia Electric and Power Company and its consolidated subsidiaries | ||
WECTEC | |||
WECTEC Global Project Services, Inc. | |||
Westinghouse | Westinghouse Electric Company LLC | ||
Westinghouse Subcontractors | Subcontractors and suppliers to the Consortium |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Dominion Energy South Carolina, Inc.
Consolidated Balance Sheets
(Unaudited)
(millions) |
| September 30, 2021 |
|
| December 31, 2020 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Utility plant in service |
| $ | 14,000 |
|
| $ | 13,680 |
|
Accumulated depreciation and amortization |
|
| (5,162 | ) |
|
| (5,027 | ) |
Construction work in progress |
|
| 524 |
|
|
| 460 |
|
Nuclear fuel, net of accumulated amortization |
|
| 210 |
|
|
| 221 |
|
Utility plant, net ($723 and $730 related to VIEs) |
|
| 9,572 |
|
|
| 9,334 |
|
Nonutility Property and Investments: |
|
|
|
|
|
|
|
|
Nonutility property, net of accumulated depreciation |
|
| 37 |
|
|
| 39 |
|
Assets held in trust, nuclear decommissioning |
|
| 248 |
|
|
| 238 |
|
Nonutility property and investments, net |
|
| 285 |
|
|
| 277 |
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
| 22 |
|
|
| 5 |
|
Receivables: |
|
|
|
|
|
|
|
|
Customer, net of allowance for uncollectible accounts of $5 and $10 |
|
| 337 |
|
|
| 365 |
|
Affiliated and related party |
|
| 32 |
|
|
| 16 |
|
Other |
|
| 54 |
|
|
| 64 |
|
Inventories (at average cost): |
|
|
|
|
|
|
|
|
Fuel |
|
| 64 |
|
|
| 68 |
|
Gas stored |
|
| 21 |
|
|
| 14 |
|
Materials and supplies |
|
| 183 |
|
|
| 176 |
|
Prepayments |
|
| 100 |
|
|
| 75 |
|
Regulatory assets |
|
| 252 |
|
|
| 229 |
|
Other current assets |
|
| 44 |
|
|
| 27 |
|
Total current assets ($73 and $103 related to VIEs) |
|
| 1,109 |
|
|
| 1,039 |
|
Deferred Debits and Other Assets: |
|
|
|
|
|
|
|
|
Regulatory assets |
|
| 3,412 |
|
|
| 3,726 |
|
Other |
|
| 147 |
|
|
| 103 |
|
Total deferred debits and other assets ($36 and $35 related to VIEs) |
|
| 3,559 |
|
|
| 3,829 |
|
Total assets |
| $ | 14,525 |
|
| $ | 14,479 |
|
Millions of dollars | September 30, 2017 | December 31, 2016 | ||||||
Assets | ||||||||
Utility Plant In Service | $ | 13,767 | $ | 13,444 | ||||
Accumulated Depreciation and Amortization | (4,559 | ) | (4,446 | ) | ||||
Construction Work in Progress | 768 | 4,845 | ||||||
Nuclear Fuel, Net of Accumulated Amortization | 249 | 271 | ||||||
Goodwill, net of writedown of $230 | 210 | 210 | ||||||
Utility Plant, Net | 10,435 | 14,324 | ||||||
Nonutility Property and Investments: | ||||||||
Nonutility property, net of accumulated depreciation of $135 and $138 | 272 | 276 | ||||||
Assets held in trust, net-nuclear decommissioning | 132 | 123 | ||||||
Other investments | 77 | 76 | ||||||
Nonutility Property and Investments, Net | 481 | 475 | ||||||
Current Assets: | ||||||||
Cash and cash equivalents | 1,011 | 208 | ||||||
Receivables: | ||||||||
Customer, net of allowance for uncollectible accounts of $5 and $6 | 545 | 616 | ||||||
Income taxes | 6 | 142 | ||||||
Other | 189 | 127 | ||||||
Inventories (at average cost): | ||||||||
Fuel and gas supply | 129 | 136 | ||||||
Materials and supplies | 159 | 155 | ||||||
Prepayments | 111 | 105 | ||||||
Other current assets | 14 | 17 | ||||||
Total Current Assets | 2,164 | 1,506 | ||||||
Deferred Debits and Other Assets: | ||||||||
Regulatory assets | 6,690 | 2,130 | ||||||
Other | 249 | 272 | ||||||
Total Deferred Debits and Other Assets | 6,939 | 2,402 | ||||||
Total | $ | 20,019 | $ | 18,707 |
See Notes to Condensed Consolidated Financial Statements.
Dominion Energy South Carolina, Inc.
Consolidated Balance Sheets—(Continued)
(Unaudited)
(millions) |
| September 30, 2021 |
|
| December 31, 2020 |
| ||
CAPITALIZATION AND LIABILITIES |
|
|
|
|
|
|
|
|
Common Stock - no par value, 40.3 million shares outstanding |
| $ | 4,166 |
|
| $ | 4,017 |
|
Retained earnings |
|
| 191 |
|
|
| 277 |
|
Accumulated other comprehensive loss |
|
| (2 | ) |
|
| (2 | ) |
Total common equity |
|
| 4,355 |
|
|
| 4,292 |
|
Noncontrolling interest |
|
| 175 |
|
|
| 192 |
|
Total equity |
|
| 4,530 |
|
|
| 4,484 |
|
Long-term debt, net |
|
| 3,327 |
|
|
| 3,327 |
|
Affiliated long-term debt |
|
| 230 |
|
|
| 230 |
|
Finance leases |
|
| 11 |
|
|
| 15 |
|
Total long-term debt |
|
| 3,568 |
|
|
| 3,572 |
|
Total capitalization |
|
| 8,098 |
|
|
| 8,056 |
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Securities due within one year |
|
| 5 |
|
|
| 39 |
|
Accounts payable |
|
| 161 |
|
|
| 178 |
|
Affiliated and related party payables |
|
| 660 |
|
|
| 457 |
|
Customer deposits and customer prepayments |
|
| 71 |
|
|
| 70 |
|
Taxes accrued |
|
| 173 |
|
|
| 215 |
|
Interest accrued |
|
| 91 |
|
|
| 95 |
|
Regulatory liabilities |
|
| 270 |
|
|
| 283 |
|
Reserves for litigation and regulatory proceedings |
|
| 133 |
|
|
| 208 |
|
Other |
|
| 116 |
|
|
| 40 |
|
Total current liabilities |
|
| 1,680 |
|
|
| 1,585 |
|
Deferred Credits and Other Liabilities: |
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
| 900 |
|
|
| 858 |
|
Asset retirement obligations |
|
| 593 |
|
|
| 597 |
|
Pension and other postretirement benefits |
|
| 177 |
|
|
| 172 |
|
Regulatory liabilities |
|
| 2,892 |
|
|
| 3,005 |
|
Affiliated liabilities |
|
| 0 |
|
|
| 13 |
|
Other |
|
| 185 |
|
|
| 193 |
|
Total deferred credits and other liabilities |
|
| 4,747 |
|
|
| 4,838 |
|
Commitments and Contingencies (see Note 10) |
|
|
|
|
|
|
|
|
Total capitalization and liabilities |
| $ | 14,525 |
|
| $ | 14,479 |
|
Millions of dollars | September 30, 2017 | December 31, 2016 | ||||||
Capitalization and Liabilities | ||||||||
Common Stock - no par value, 143 million shares outstanding | $ | 2,389 | $ | 2,390 | ||||
Retained Earnings | 3,447 | 3,384 | ||||||
Accumulated Other Comprehensive Loss | (49 | ) | (49 | ) | ||||
Total Common Equity | 5,787 | 5,725 | ||||||
Long-Term Debt, net | 6,455 | 6,473 | ||||||
Total Capitalization | 12,242 | 12,198 | ||||||
Current Liabilities: | ||||||||
Short-term borrowings | 1,022 | 941 | ||||||
Current portion of long-term debt | 177 | 17 | ||||||
Accounts payable | 266 | 404 | ||||||
Customer deposits and customer prepayments | 116 | 168 | ||||||
Taxes accrued | 526 | 201 | ||||||
Interest accrued | 97 | 84 | ||||||
Dividends declared | 85 | 80 | ||||||
Derivative financial instruments | 45 | 35 | ||||||
Other | 117 | 135 | ||||||
Total Current Liabilities | 2,451 | 2,065 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
Deferred income taxes, net | 1,767 | 2,159 | ||||||
Asset retirement obligations | 569 | 558 | ||||||
Pension and other postretirement benefits | 373 | 373 | ||||||
Unrecognized tax benefits | 402 | 219 | ||||||
Regulatory liabilities | 2,015 | 930 | ||||||
Other | 200 | 205 | ||||||
Total Deferred Credits and Other Liabilities | 5,326 | 4,444 | ||||||
Commitments and Contingencies (Note 9) | ||||||||
Total | $ | 20,019 | $ | 18,707 |
See Notes to Condensed Consolidated Financial Statements.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
Millions of dollars, except per share amounts | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating Revenues: | ||||||||||||||||
Electric | $ | 786 | $ | 817 | $ | 2,042 | $ | 2,035 | ||||||||
Gas - regulated | 123 | 111 | 584 | 538 | ||||||||||||
Gas - nonregulated | 167 | 165 | 623 | 598 | ||||||||||||
Total Operating Revenues | 1,076 | 1,093 | 3,249 | 3,171 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Fuel used in electric generation | 167 | 176 | 464 | 443 | ||||||||||||
Purchased power | 22 | 21 | 54 | 50 | ||||||||||||
Gas purchased for resale | 211 | 202 | 808 | 752 | ||||||||||||
Other operation and maintenance | 183 | 187 | 543 | 558 | ||||||||||||
Impairment loss | 210 | — | 210 | — | ||||||||||||
Depreciation and amortization | 96 | 93 | 285 | 276 | ||||||||||||
Other taxes | 67 | 66 | 200 | 192 | ||||||||||||
Total Operating Expenses | 956 | 745 | 2,564 | 2,271 | ||||||||||||
Operating Income | 120 | 348 | 685 | 900 | ||||||||||||
Other Income (Expense): | ||||||||||||||||
Other income | 28 | 15 | 61 | 46 | ||||||||||||
Other expense | (7 | ) | (7 | ) | (25 | ) | (31 | ) | ||||||||
Interest charges, net of allowance for borrowed funds used during construction of $2, $5, $16 and $14 | (95 | ) | (88 | ) | (270 | ) | (255 | ) | ||||||||
Allowance for equity funds used during construction | — | 7 | 17 | 22 | ||||||||||||
Total Other Expense | (74 | ) | (73 | ) | (217 | ) | (218 | ) | ||||||||
Income Before Income Tax Expense | 46 | 275 | 468 | 682 | ||||||||||||
Income Tax Expense | 12 | 86 | 142 | 211 | ||||||||||||
Net Income | $ | 34 | $ | 189 | $ | 326 | $ | 471 | ||||||||
Earnings Per Share of Common Stock | $ | 0.24 | $ | 1.32 | $ | 2.28 | $ | 3.29 | ||||||||
Weighted Average Common Shares Outstanding (millions) | 143 | 143 | 143 | 143 | ||||||||||||
Dividends Declared Per Share of Common Stock | $ | 0.6125 | $ | 0.5750 | $ | 1.8375 | $ | 1.7250 |
Dominion Energy South Carolina, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Operating Revenue(1) |
| $ | 863 |
|
| $ | 755 |
|
| $ | 2,299 |
|
| $ | 2,051 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel used in electric generation(1) |
|
| 200 |
|
|
| 135 |
|
|
| 452 |
|
|
| 334 |
|
Purchased power(1) |
|
| 24 |
|
|
| 25 |
|
|
| 67 |
|
|
| 63 |
|
Gas purchased for resale(1) |
|
| 57 |
|
|
| 33 |
|
|
| 188 |
|
|
| 124 |
|
Other operations and maintenance |
|
| 116 |
|
|
| 93 |
|
|
| 332 |
|
|
| 276 |
|
Other operations and maintenance - affiliated suppliers |
|
| 45 |
|
|
| 49 |
|
|
| 145 |
|
|
| 154 |
|
Impairment of assets and other charges |
|
| 1 |
|
|
| 63 |
|
|
| 320 |
|
|
| 65 |
|
Depreciation and amortization |
|
| 122 |
|
|
| 118 |
|
|
| 362 |
|
|
| 354 |
|
Other taxes(1) |
|
| 64 |
|
|
| 59 |
|
|
| 191 |
|
|
| 186 |
|
Total operating expenses |
|
| 629 |
|
|
| 575 |
|
|
| 2,057 |
|
|
| 1,556 |
|
Operating income |
|
| 234 |
|
|
| 180 |
|
|
| 242 |
|
|
| 495 |
|
Other income (expense), net |
|
| 6 |
|
|
| (2 | ) |
|
| 0 |
|
|
| 3 |
|
Interest charges, net of allowance for borrowed funds used during construction of $1, $2, $3 and $5(2) |
|
| 50 |
|
|
| 57 |
|
|
| 159 |
|
|
| 173 |
|
Income before income tax expense |
|
| 190 |
|
|
| 121 |
|
|
| 83 |
|
|
| 325 |
|
Income tax expense |
|
| 42 |
|
|
| 15 |
|
|
| 6 |
|
|
| 59 |
|
Net Income and Other Comprehensive Income |
|
| 148 |
|
|
| 106 |
|
|
| 77 |
|
|
| 266 |
|
Comprehensive Income Attributable to Noncontrolling Interest |
|
| 4 |
|
|
| 5 |
|
|
| 13 |
|
|
| 8 |
|
Comprehensive Income Available to Common Shareholder |
| $ | 144 |
|
| $ | 101 |
|
| $ | 64 |
|
| $ | 258 |
|
(1) | See Note 12 for amounts attributable to affiliates. |
(2) | See Note 5 for amounts attributable to affiliates. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Income | $ | 34 | $ | 189 | $ | 326 | $ | 471 | ||||||||
Other Comprehensive Income (Loss), net of tax: | ||||||||||||||||
Unrealized Gains (Losses) on Cash Flow Hedging Activities: | ||||||||||||||||
Arising during period, net of tax of $-, $-, $(3) and $(3) | — | (1 | ) | (5 | ) | (4 | ) | |||||||||
Reclassified as increases to interest expense, net of tax of $1, $1, $3 and $3 | 2 | 2 | 6 | 6 | ||||||||||||
Reclassified as increases (decreases) to gas purchased for resale, net of tax of $-, $ -, $(1) and $3 | — | — | (2 | ) | 6 | |||||||||||
Net unrealized gains (losses) on cash flow hedging activities | 2 | 1 | (1 | ) | 8 | |||||||||||
Deferred cost of employee benefit plans, net of tax of $-, $-, $- and $- | 1 | — | 1 | — | ||||||||||||
Other Comprehensive Income | 3 | 1 | — | 8 | ||||||||||||
Total Comprehensive Income | $ | 37 | $ | 190 | $ | 326 | $ | 479 |
See Notes to Condensed Consolidated Financial Statements.
Dominion Energy South Carolina, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
|
| Nine Months Ended September 30, |
| |||||
(millions) |
| 2021 |
|
| 2020 |
| ||
Operating Activities |
|
|
|
|
|
|
|
|
Net income |
| $ | 77 |
|
| $ | 266 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Impairment of assets and other charges |
|
| 320 |
|
|
| 12 |
|
Deferred income taxes, net |
|
| 42 |
|
|
| 255 |
|
Depreciation and amortization |
|
| 362 |
|
|
| 354 |
|
Amortization of nuclear fuel |
|
| 30 |
|
|
| 31 |
|
Other adjustments |
|
| 8 |
|
|
| 24 |
|
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables |
|
| 35 |
|
|
| (64 | ) |
Receivables - affiliated and related party |
|
| (31 | ) |
|
| 5 |
|
Inventories |
|
| (10 | ) |
|
| 10 |
|
Prepayments |
|
| (33 | ) |
|
| (43 | ) |
Regulatory assets |
|
| (86 | ) |
|
| (8 | ) |
Regulatory liabilities |
|
| (133 | ) |
|
| (168 | ) |
Accounts payable |
|
| 34 |
|
|
| (33 | ) |
Accounts payable - affiliated and related party |
|
| (65 | ) |
|
| (24 | ) |
Taxes accrued |
|
| (42 | ) |
|
| (52 | ) |
Pension and other postretirement benefits |
|
| 5 |
|
|
| 0 |
|
Other assets and liabilities |
|
| 24 |
|
|
| 41 |
|
Net cash provided by operating activities |
|
| 537 |
|
|
| 606 |
|
Investing Activities |
|
|
|
|
|
|
|
|
Property additions and construction expenditures |
|
| (584 | ) |
|
| (472 | ) |
Proceeds from investments and sales of assets |
|
| 7 |
|
|
| 12 |
|
Purchase of investments |
|
| (7 | ) |
|
| (11 | ) |
Purchase of investments - affiliated |
|
| (2 | ) |
|
| (1 | ) |
Short-term investments - affiliated |
|
| 15 |
|
|
| 0 |
|
Other |
|
| 1 |
|
|
| 0 |
|
Net cash used in investing activities |
|
| (570 | ) |
|
| (472 | ) |
Financing Activities |
|
|
|
|
|
|
|
|
Repayment of long-term debt |
|
| (34 | ) |
|
| 0 |
|
Dividend to parent |
|
| (180 | ) |
|
| 0 |
|
Short-term borrowings - affiliated, net |
|
| 268 |
|
|
| (130 | ) |
Other |
|
| (4 | ) |
|
| (5 | ) |
Net cash provided by (used in) financing activities |
|
| 50 |
|
|
| (135 | ) |
Net increase (decrease) in cash, restricted cash and equivalents |
|
| 17 |
|
|
| (1 | ) |
Cash, restricted cash and equivalents at beginning of period(1) |
|
| 5 |
|
|
| 4 |
|
Cash, restricted cash and equivalents at end of period(1) |
| $ | 22 |
|
| $ | 3 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Significant noncash investing and financing activities(2): |
|
|
|
|
|
|
|
|
Accrued construction expenditures |
| $ | 38 |
|
| $ | 42 |
|
Leases(3) |
|
| 0 |
|
|
| 2 |
|
(1) | At September 30, 2021, September 30, 2020, December 31, 2020 and December 31, 2019 there were 0 restricted cash and equivalent balances. |
(2) | See Note 4 for noncash financing activities related to capital contributions associated with the settlement of litigation. |
Nine Months Ended September 30, | ||||||||
Millions of dollars | 2017 | 2016 | ||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 326 | $ | 471 | ||||
Adjustments to reconcile net income to net cash provided from operating activities: | ||||||||
Impairment loss | 210 | — | ||||||
Deferred income taxes, net | (395 | ) | 151 | |||||
Depreciation and amortization | 302 | 289 | ||||||
Amortization of nuclear fuel | 31 | 42 | ||||||
Allowance for equity funds used during construction | (17 | ) | (22 | ) | ||||
Carrying cost recovery | (27 | ) | (12 | ) | ||||
Changes in certain assets and liabilities: | ||||||||
Receivables | 79 | (8 | ) | |||||
Income taxes receivable | 136 | (306 | ) | |||||
Inventories | (58 | ) | (21 | ) | ||||
Prepayments | (6 | ) | (2 | ) | ||||
Regulatory assets | (48 | ) | (14 | ) | ||||
Regulatory liabilities | (3 | ) | 2 | |||||
Accounts payable | (22 | ) | (36 | ) | ||||
Unrecognized tax benefits | 183 | 210 | ||||||
Taxes accrued | 325 | (84 | ) | |||||
Derivative financial instruments | (3 | ) | (9 | ) | ||||
Other assets | (37 | ) | (58 | ) | ||||
Other liabilities | (49 | ) | 86 | |||||
Net Cash Provided From Operating Activities | 927 | 679 | ||||||
Cash Flows From Investing Activities: | ||||||||
Property additions and construction expenditures | (1,095 | ) | (1,178 | ) | ||||
Proceeds from monetization of guaranty settlement | 1,013 | — | ||||||
Proceeds from investments (including derivative collateral returned) | 116 | 629 | ||||||
Purchase of investments (including derivative collateral posted) | (115 | ) | (743 | ) | ||||
Payments upon interest rate derivative contract settlements | — | (88 | ) | |||||
Net Cash Used For Investing Activities | (81 | ) | (1,380 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from issuance of long-term debt | 150 | 592 | ||||||
Repayment of long-term debt | (16 | ) | (15 | ) | ||||
Dividends | (258 | ) | (243 | ) | ||||
Short-term borrowings, net | 81 | 247 | ||||||
Net Cash (Used For) Provided From Financing Activities | (43 | ) | 581 | |||||
Net Increase (Decrease) In Cash and Cash Equivalents | 803 | (120 | ) | |||||
Cash and Cash Equivalents, January 1 | 208 | 176 | ||||||
Cash and Cash Equivalents, September 30 | $ | 1,011 | $ | 56 | ||||
Supplemental Cash Flow Information: | ||||||||
Cash for–Interest paid (net of capitalized interest of $16 and $14) | $ | 247 | $ | 235 | ||||
–Income taxes paid | 1 | 229 | ||||||
–Income taxes received | 123 | — | ||||||
Noncash Investing and Financing Activities: | ||||||||
Accrued construction expenditures | 44 | 80 | ||||||
Capital leases | 6 | 12 | ||||||
Guaranty settlement receivable | 83 | — |
(3) | Includes $2 million of financing leases for the nine months ended September 30, 2020. |
See Combined Notes to Condensed Consolidated Financial Statements.
Dominion Energy South Carolina, Inc.
Consolidated Statements of Changes in Common Equity
(Unaudited)
Quarter-To-Date
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(millions) |
| Shares |
|
| Amount |
|
| Retained Earnings |
|
| AOCI |
|
| Noncontrolling Interest |
|
| Total Equity |
| ||||||
June 30, 2020 |
|
| 40 |
|
| $ | 3,695 |
|
| $ | 177 |
|
| $ | (3 | ) |
| $ | 183 |
|
| $ | 4,052 |
|
Total comprehensive income available to common shareholder |
|
|
|
|
|
|
|
|
|
| 101 |
|
|
|
|
|
|
| 5 |
|
|
| 106 |
|
Capital contribution from parent |
|
|
|
|
| 322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 322 |
| |
September 30, 2020 |
|
| 40 |
|
| $ | 4,017 |
|
| $ | 278 |
|
| $ | (3 | ) |
| $ | 188 |
|
| $ | 4,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021 |
|
| 40 |
|
| $ | 4,017 |
|
| $ | 122 |
|
| $ | (2 | ) |
| $ | 171 |
|
| $ | 4,308 |
|
Total comprehensive income available to common shareholder |
|
|
|
|
|
|
|
|
|
| 144 |
|
|
|
|
|
|
| 4 |
|
|
| 148 |
|
Capital contribution from parent |
|
|
|
|
|
| 149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 149 |
|
Dividend to parent |
|
|
|
|
|
|
|
|
|
| (75 | ) |
|
|
|
|
|
|
|
|
|
| (75 | ) |
September 30, 2021 |
|
| 40 |
|
| $ | 4,166 |
|
| $ | 191 |
|
| $ | (2 | ) |
| $ | 175 |
|
| $ | 4,530 |
|
Year-To-Date
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(millions) |
| Shares |
|
| Amount |
|
| Retained Earnings |
|
| AOCI |
|
| Noncontrolling Interest |
|
| Total Equity |
| ||||||
December 31, 2019 |
|
| 40 |
|
| $ | 3,695 |
|
| $ | 20 |
|
| $ | (3 | ) |
| $ | 180 |
|
| $ | 3,892 |
|
Total comprehensive income available to common shareholder |
|
|
|
|
|
|
|
|
|
| 258 |
|
|
|
|
|
|
| 8 |
|
|
| 266 |
|
Capital contribution from parent |
|
|
|
|
| 322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 322 |
| |
September 30, 2020 |
|
| 40 |
|
| $ | 4,017 |
|
| $ | 278 |
|
| $ | (3 | ) |
| $ | 188 |
|
| $ | 4,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
|
| 40 |
|
| $ | 4,017 |
|
| $ | 277 |
|
| $ | (2 | ) |
| $ | 192 |
|
| $ | 4,484 |
|
Total comprehensive income available to common shareholder |
|
|
|
|
|
|
|
|
|
| 64 |
|
|
|
|
|
|
| 13 |
|
|
| 77 |
|
Capital contribution from parent |
|
|
|
|
|
| 149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 149 |
|
Dividend to parent |
|
|
|
|
|
|
|
|
|
| (150 | ) |
|
|
|
|
|
| (30 | ) |
|
| (180 | ) |
September 30, 2021 |
|
| 40 |
|
| $ | 4,166 |
|
| $ | 191 |
|
| $ | (2 | ) |
| $ | 175 |
|
| $ | 4,530 |
|
Common Stock | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||
Millions | Shares | Outstanding Amount | Treasury Amount | Retained Earnings | Gains (Losses) from Cash Flow Hedges | Deferred Employee Benefit Plans | Total AOCI | Total | ||||||||||||||||||||||
Balance as of January 1, 2017 | 143 | $ | 2,402 | $ | (12 | ) | $ | 3,384 | $ | (36 | ) | $ | (13 | ) | $ | (49 | ) | $ | 5,725 | |||||||||||
Net Income | 326 | 326 | ||||||||||||||||||||||||||||
Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||
Losses arising during the period | (5 | ) | — | (5 | ) | (5 | ) | |||||||||||||||||||||||
Losses/amortization reclassified from AOCI | 4 | 1 | 5 | 5 | ||||||||||||||||||||||||||
Total Comprehensive Income | 326 | (1 | ) | 1 | — | 326 | ||||||||||||||||||||||||
Purchase of Treasury Stock | — | — | (1 | ) | (1 | ) | ||||||||||||||||||||||||
Dividends Declared | (263 | ) | (263 | ) | ||||||||||||||||||||||||||
Balance as of September 30, 2017 | 143 | $ | 2,402 | $ | (13 | ) | $ | 3,447 | $ | (37 | ) | $ | (12 | ) | $ | (49 | ) | $ | 5,787 | |||||||||||
Balance as of January 1, 2016 | 143 | $ | 2,402 | $ | (12 | ) | $ | 3,118 | $ | (53 | ) | $ | (12 | ) | $ | (65 | ) | $ | 5,443 | |||||||||||
Net Income | 471 | 471 | ||||||||||||||||||||||||||||
Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||
Losses arising during the period | (4 | ) | — | (4 | ) | (4 | ) | |||||||||||||||||||||||
Losses/amortization reclassified from AOCI | 12 | — | 12 | 12 | ||||||||||||||||||||||||||
Total Comprehensive Income | 471 | 8 | — | 8 | 479 | |||||||||||||||||||||||||
Dividends Declared | (247 | ) | (247 | ) | ||||||||||||||||||||||||||
Balance as of September 30, 2016 | 143 | $ | 2,402 | $ | (12 | ) | $ | 3,342 | $ | (45 | ) | $ | (12 | ) | $ | (57 | ) | $ | 5,675 |
See Notes to Condensed Consolidated Financial Statements.
Dominion Energy South Carolina, Electric & Gas Company and Affiliates
Millions of dollars | September 30, 2017 | December 31, 2016 | ||||||
Assets | ||||||||
Utility Plant In Service | $ | 11,783 | $ | 11,510 | ||||
Accumulated Depreciation and Amortization | (4,078 | ) | (3,991 | ) | ||||
Construction Work in Progress | 554 | 4,813 | ||||||
Nuclear Fuel, Net of Accumulated Amortization | 249 | 271 | ||||||
Utility Plant, Net ($740 and $756 related to VIEs) | 8,508 | 12,603 | ||||||
Nonutility Property and Investments: | ||||||||
Nonutility property, net of accumulated depreciation | 71 | 69 | ||||||
Assets held in trust, net-nuclear decommissioning | 132 | 123 | ||||||
Other investments | 2 | 3 | ||||||
Nonutility Property and Investments, Net | 205 | 195 | ||||||
Current Assets: | ||||||||
Cash and cash equivalents | 1,015 | 164 | ||||||
Receivables: | ||||||||
Customer, net of allowance for uncollectible accounts of $4 and $3 | 401 | 378 | ||||||
Affiliated companies | 8 | 16 | ||||||
Income taxes | — | 53 | ||||||
Other | 168 | 94 | ||||||
Inventories (at average cost): | ||||||||
Fuel | 78 | 83 | ||||||
Materials and supplies | 148 | 143 | ||||||
Prepayments | 98 | 88 | ||||||
Other current assets | 1 | 1 | ||||||
Total Current Assets ($57 and $85 related to VIEs) | 1,917 | 1,020 | ||||||
Deferred Debits and Other Assets: | ||||||||
Regulatory assets | 6,582 | 2,030 | ||||||
Other | 221 | 243 | ||||||
Total Deferred Debits and Other Assets ($49 and $52 related to VIEs) | 6,803 | 2,273 | ||||||
Total | $ | 17,433 | $ | 16,091 |
Notes to Condensed Consolidated Financial Statements.
Millions of dollars | September 30, 2017 | December 31, 2016 | ||||||
Capitalization and Liabilities | ||||||||
Common Stock - no par value, 40.3 million shares outstanding | $ | 2,860 | $ | 2,860 | ||||
Retained Earnings | 2,518 | 2,481 | ||||||
Accumulated Other Comprehensive Loss | (3 | ) | (3 | ) | ||||
Total Common Equity | 5,375 | 5,338 | ||||||
Noncontrolling Interest | 137 | 134 | ||||||
Total Equity | 5,512 | 5,472 | ||||||
Long-Term Debt, net | 4,990 | 5,154 | ||||||
Total Capitalization | 10,502 | 10,626 | ||||||
Current Liabilities: | ||||||||
Short-term borrowings | 945 | 804 | ||||||
Current portion of long-term debt | 173 | 12 | ||||||
Accounts payable | 154 | 247 | ||||||
Affiliated payables | 96 | 122 | ||||||
Customer deposits and customer prepayments | 74 | 126 | ||||||
Taxes accrued | 663 | 195 | ||||||
Interest accrued | 71 | 68 | ||||||
Dividends declared | 81 | 79 | ||||||
Derivative financial instruments | 41 | 28 | ||||||
Other | 69 | 55 | ||||||
Total Current Liabilities | 2,367 | 1,736 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
Deferred income taxes, net | 1,505 | 1,939 | ||||||
Asset retirement obligations | 533 | 522 | ||||||
Pension and other postretirement benefits | 231 | 232 | ||||||
Unrecognized tax benefits | 402 | 236 | ||||||
Regulatory liabilities | 1,779 | 695 | ||||||
Other | 99 | 89 | ||||||
Other affiliate | 15 | 16 | ||||||
Total Deferred Credits and Other Liabilities | 4,564 | 3,729 | ||||||
Commitments and Contingencies (Note 9) | ||||||||
Total | $ | 17,433 | $ | 16,091 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating Revenues: | ||||||||||||||||
Electric | $ | 786 | $ | 817 | $ | 2,042 | $ | 2,035 | ||||||||
Electric - nonconsolidated affiliate | 1 | 1 | 4 | 4 | ||||||||||||
Gas | 69 | 64 | 284 | 252 | ||||||||||||
Gas - nonconsolidated affiliate | — | — | 1 | 1 | ||||||||||||
Total Operating Revenues | 856 | 882 | 2,331 | 2,292 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Fuel used in electric generation | 132 | 141 | 370 | 368 | ||||||||||||
Fuel used in electric generation - nonconsolidated affiliate | 35 | 35 | 94 | 75 | ||||||||||||
Purchased power | 22 | 21 | 54 | 50 | ||||||||||||
Gas purchased for resale | 39 | 36 | 147 | 117 | ||||||||||||
Gas purchased for resale - nonconsolidated affiliate | — | — | — | 9 | ||||||||||||
Other operation and maintenance | 109 | 101 | 305 | 298 | ||||||||||||
Other operation and maintenance - nonconsolidated affiliate | 45 | 51 | 141 | 156 | ||||||||||||
Impairment loss | 210 | — | 210 | — | ||||||||||||
Depreciation and amortization | 78 | 76 | 232 | 225 | ||||||||||||
Other taxes | 62 | 61 | 183 | 173 | ||||||||||||
Other taxes - nonconsolidated affiliate | 1 | 1 | 4 | 5 | ||||||||||||
Total Operating Expenses | 733 | 523 | 1,740 | 1,476 | ||||||||||||
Operating Income | 123 | 359 | 591 | 816 | ||||||||||||
Other Income (Expense): | ||||||||||||||||
Other income | 21 | 7 | 36 | 20 | ||||||||||||
Other expense | (6 | ) | (4 | ) | (17 | ) | (19 | ) | ||||||||
Interest charges, net of allowance for borrowed funds used during construction of $2, $5, $15 and $13 | (76 | ) | (70 | ) | (214 | ) | (201 | ) | ||||||||
Allowance for equity funds used during construction | (3 | ) | 6 | 13 | 19 | |||||||||||
Total Other Income (Expense) | (64 | ) | (61 | ) | (182 | ) | (181 | ) | ||||||||
Income Before Income Tax Expense | 59 | 298 | 409 | 635 | ||||||||||||
Income Tax Expense | 17 | 94 | 129 | 202 | ||||||||||||
Net Income and Total Comprehensive Income | 42 | 204 | 280 | 433 | ||||||||||||
Less Net Income and Total Comprehensive Income Attributable to Noncontrolling Interest | (3 | ) | (3 | ) | (10 | ) | (10 | ) | ||||||||
Earnings and Comprehensive Income Available to Common Shareholder | $ | 39 | $ | 201 | $ | 270 | $ | 423 | ||||||||
Dividends Declared on Common Stock | $ | 81 | $ | 76 | $ | 240 | $ | 225 |
Nine Months Ended September 30, | ||||||||
Millions of dollars | 2017 | 2016 | ||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 280 | $ | 433 | ||||
Adjustments to reconcile net income to net cash provided from operating activities: | ||||||||
Impairment loss | 210 | — | ||||||
Deferred income taxes, net | (434 | ) | 127 | |||||
Depreciation and amortization | 238 | 229 | ||||||
Amortization of nuclear fuel | 31 | 42 | ||||||
Allowance for equity funds used during construction | (13 | ) | (19 | ) | ||||
Carrying cost recovery | (27 | ) | (12 | ) | ||||
Changes in certain assets and liabilities: | ||||||||
Receivables | (27 | ) | (70 | ) | ||||
Receivables - affiliate | 8 | 9 | ||||||
Income tax receivable | 53 | (206 | ) | |||||
Inventories | (34 | ) | (14 | ) | ||||
Prepayments | (10 | ) | (15 | ) | ||||
Regulatory assets | (40 | ) | (6 | ) | ||||
Regulatory liabilities | (1 | ) | (3 | ) | ||||
Accounts payable | 31 | (13 | ) | |||||
Accounts payable - affiliate | (28 | ) | (13 | ) | ||||
Taxes accrued | 468 | (151 | ) | |||||
Unrecognized tax benefit | 166 | 210 | ||||||
Other assets | (29 | ) | (117 | ) | ||||
Other liabilities | (14 | ) | 64 | |||||
Net Cash Provided From Operating Activities | 828 | 475 | ||||||
Cash Flows From Investing Activities: | ||||||||
Property additions and construction expenditures | (882 | ) | (1,024 | ) | ||||
Proceeds from monetization of guaranty settlement | 1,013 | — | ||||||
Proceeds from investments (including derivative collateral returned) | 96 | 577 | ||||||
Purchase of investments (including derivative collateral posted) | (98 | ) | (699 | ) | ||||
Payments upon interest rate derivative contract settlements | — | (88 | ) | |||||
Proceeds from money pool investments | — | 9 | ||||||
Net Cash Provided From (Used For) Investing Activities | 129 | (1,225 | ) | |||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from issuance of debt | — | 494 | ||||||
Repayment of long-term debt | (11 | ) | (10 | ) | ||||
Dividends | (238 | ) | (224 | ) | ||||
Contributions from parent | — | 100 | ||||||
Money pool borrowings, net | 2 | (5 | ) | |||||
Short-term borrowings, net | 141 | 294 | ||||||
Net Cash Provided From (Used For) Financing Activities | (106 | ) | 649 | |||||
Net Decrease In Cash and Cash Equivalents | 851 | (101 | ) | |||||
Cash and Cash Equivalents, January 1 | 164 | 130 | ||||||
Cash and Cash Equivalents, September 30 | $ | 1,015 | $ | 29 | ||||
Supplemental Cash Flow Information: | ||||||||
Cash for–Interest (net of capitalized interest of $15 and $13) | $ | 195 | $ | 182 | ||||
– Income taxes paid | 3 | 286 | ||||||
– Income taxes received | 143 | 9 | ||||||
Noncash Investing and Financing Activities: | ||||||||
Accrued construction expenditures | 21 | 71 | ||||||
Capital leases | 6 | 12 | ||||||
Guaranty settlement receivable | 83 | — |
(Unaudited)
Common Stock | |||||||||||||||||||||||
Millions | Shares | Amount | Retained Earnings | AOCI | Noncontrolling Interest | Total Equity | |||||||||||||||||
Balance at January 1, 2017 | 40 | $ | 2,860 | $ | 2,481 | $ | (3 | ) | $ | 134 | $ | 5,472 | |||||||||||
Earnings available to common shareholder | 270 | 10 | 280 | ||||||||||||||||||||
Total Comprehensive Income | 270 | — | 10 | 280 | |||||||||||||||||||
Cash dividend declared | (233 | ) | (7 | ) | (240 | ) | |||||||||||||||||
Balance at September 30, 2017 | 40 | $ | 2,860 | $ | 2,518 | $ | (3 | ) | $ | 137 | $ | 5,512 | |||||||||||
Balance at January 1, 2016 | 40 | $ | 2,760 | $ | 2,265 | $ | (3 | ) | $ | 129 | $ | 5,151 | |||||||||||
Earnings available to common shareholder | 423 | 10 | 433 | ||||||||||||||||||||
Total Comprehensive Income | 423 | — | 10 | 433 | |||||||||||||||||||
Capital Contributions from parent | 100 | 100 | |||||||||||||||||||||
Cash dividend declared | (219 | ) | (6 | ) | (225 | ) | |||||||||||||||||
Balance at September 30, 2016 | 40 | $ | 2,860 | $ | 2,469 | $ | (3 | ) | $ | 133 | $ | 5,459 |
The following unaudited notes to the condensed consolidated financial statements are a combined presentation. Except as otherwise indicated herein, each note applies to the Company and Consolidated SCE&G; however, Consolidated SCE&G makes no representation as to information relating solely to SCANA Corporation or its subsidiaries (other than Consolidated SCE&G).
These are interim financial statements and, due to the seasonality of each company'sDESC's business and matters that may occur during the rest of the year, including the matters described in condensed consolidated Note 9 under
Certain amounts in DESC's 2020 Consolidated Financial Statements and Notes have been reclassified to conform to the 2021 presentation for comparative purposes; however, such reclassifications did not affect DESC's net income and other comprehensive income, total assets, liabilities, equity or cash flows. Effective in the second quarter of 2021, DESC updated its Statements of Cash Flows to present net charges for allowance for credit risk and write-offs of accounts receivables within other adjustments to reconcile net income to net cash provided by operating activities from the previous presentation within changes in accounts receivable. All prior period information has been conformed to this presentation, which does not result in a change to net cash provided by operating activities.
DESC is a wholly-owned subsidiary of SCANA, which is a wholly-owned subsidiary of Dominion Energy.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation and Variable Interest Entities
DESC has determined that it has a controlling financial interest in each of GENCO and Fuel Company (which are considered to be VIEs) and, accordingly, DESC's Consolidated SCE&G's condensed consolidated financial statementsFinancial Statements include, after eliminating intercompany balances and transactions, the accounts of SCE&G,DESC, GENCO and Fuel Company. The equity interestsSee Note 2 to the Consolidated Financial Statements included in DESC’s Annual Report on Form 10-K for the year ended December 31, 2020 for a description of GENCO and Fuel Company are held solely byCompany.
Effective January 2021, DESC purchases shared services from DES, an affiliated VIE that provides accounting, legal, finance and certain administrative and technical services to all Dominion Energy subsidiaries, including DESC. DESC had previously purchased such services from DESS, an affiliated VIE, that had provided such services to all SCANA SCE&G’s parent.subsidiaries. DESC has determined that it is not the primary beneficiary of DES as it does not have either the power to direct the activities that most significantly impact its economic performance or an obligation to absorb losses and benefits which could be significant to it. See Note 12 for amounts attributable to affiliates.
Significant Accounting Policies
There have been no significant changes from Note 2 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, 2020, with the exception of the item described below.
Asset Retirement Obligations
In the third quarter of 2021, DESC revised its estimated cash flow projections associated with certain gas distribution pipeline AROs. As a result, GENCO’s and Fuel Company’s equity and results of operations are reflected as noncontrolling interest in Consolidated SCE&G’s condensed consolidated financial statements.
2.
RATE AND OTHER REGULATORY MATTERSRegulatory Matters Involving Potential Loss Contingencies
As a result of issues generated in the ordinary course of business, DESC is involved in various regulatory matters. Certain regulatory matters may ultimately result in a loss; however, as such matters are in an initial procedural phase, involve uncertainty as to the outcome of pending reviews or orders, and/or involve significant factual issues that need to be resolved, it is not possible for DESC to estimate a range of possible loss. For regulatory matters that DESC cannot estimate, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through the regulatory process such that DESC is able to estimate a range of possible loss. For regulatory matters that DESC is able to reasonably estimate a range of possible losses, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. Any estimated range is based on currently available information, involves elements of judgment and significant uncertainties and may not represent DESC’s
maximum possible loss exposure. The circumstances of such regulatory matters will change from time to time and actual results may vary significantly from the current estimate. For current matters not specifically reported below, management does not anticipate that the outcome from such matters would have a material effect on DESC’s financial position, liquidity or results of operations.
Other Regulatory Matters
Other than the following matters, there have been no significant developments regarding the pending regulatory matters disclosed in Note 3 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, 2020.
South Carolina Electric Base Rate Matters
In August 2020, DESC filed its retail electric base rate case and schedules with the South Carolina Commission. DESC proposed a non-fuel, base rate increase of $178 million, or 7.75%, based on an adjusted test year data, effective on or after the first billing cycle of March 2021. The base rate increase was proposed to recover the significant investment in assets and operating resources required to serve an expanding customer base, maintain the safety, reliability and efficiency of DESC’s system and meet increasingly stringent reliability, security and environmental requirements for the benefit of South Carolina customers. DESC presented an earned ROE of 5.90% based upon a fully-adjusted test period. The proposed rates would provide for an earned ROE equal to the current authorized earned ROE of 10.25% established in the previous rate case in 2012. In January 2021, the South Carolina Commission approved a proposal made by the South Carolina Office of Regulatory Staff, and agreed to by DESC and other intervenors, to stay the base rate case due to then current economic conditions and to allow the parties more time to negotiate a settlement with a final order to be issued no later than August 2021.
In July 2021, DESC, the South Carolina Office of Regulatory Staff and other parties of record filed a comprehensive settlement agreement with the South Carolina Commission for approval. The comprehensive settlement agreement provides for a non-fuel, base rate increase of $62 million (resulting in a net increase of $36 million after considering an accelerated amortization of certain excess deferred income taxes) commencing with bills issued on September 1, 2021 and an authorized earned ROE of 9.50%. Additionally, DESC has agreed to commit up to $15 million to forgive retail electric customer balances that were more than 60 days past due as of May 31, 2021, and provide $15 million for energy efficiency upgrades and critical health and safety repairs to customer homes. Pursuant to the comprehensive settlement agreement, DESC would not filea retail electric base rate case prior to July 1, 2023, such that new rates would not be effective prior to January 1, 2024, absent unforeseen extraordinary economic or financial conditions that may include changes in corporate tax rates. In July 2021, the South Carolina Commission voted to approve the comprehensive settlement agreement and issued its final order in August 2021.
In connection with this matter, in the second quarter of 2021 DESC recorded charges of $249 million ($187 million after-tax) reflected within impairment of assets and other charges, including $237 million of regulatory assets associated with DESC’s purchases of its first mortgage bonds during 2019 that are no longer probable of recovery under the settlement agreement, and $18 million ($14 million after-tax) reflected within other income in its Consolidated Statements of Income.
Electric -– Cost of Fuel
DESC’s retail electric rates include a cost of fuel component approved SCE&G's participation in a DER program and recovery of related costs as a separate component of SCE&G's overall fuel factor. Under this order, SCE&G will, among other things, implement programs to encourage the development of renewable energy facilities with a total nameplate capacity of at least approximately 84.5 MW by the endSouth Carolina Commission which may be adjusted periodically to reflect changes in the price of 2020, of which half is to be customer-scale solar capacity and half is to be utility-scale solar capacity.
Electric – Other
DESC has approval for a 12-month period beginning with the first billing cycle of May 2017, projected DER program costs of approximately $16.5 million. Additionally, deferral of carrying costs will be allowed for base fuel component under-collected balances as they occur.
DESC utilizes a pension costs rider approved by the South Carolina Commission which is designed to allow recovery of projected pension costs, including under-collected balances or net of over-collected balances, as applicable. The rider is typically reviewed for adjustment every 12 months with any resulting increase or decrease going into effect beginning with the first billing cycle in May 2017.
Natural Gas Rates
In June 2021, DESC filed with the SCPSC a petition for rehearing and reconsideration of the order as well as a response to the SCPSC's request for briefing concerning coordination of proceedings under this complaint with proceedings for the Request. On November 1, 2017, the SCPSC denied SCE&G's petition for rehearing and reconsideration.
DESC's natural gas tariffs include a PGA that provides for the recovery of actual gas costs incurred, including transportation costs. SCE&G’sDESC’s gas rates are calculated using a methodology which may adjust the cost of gas monthly based on a 12-month rolling average, and its gas purchasing policies and practices are reviewed annually by the SCPSC. SCE&G’s annual PGA hearing for the 12-month period ending July 31, 2017, is scheduled for November 9, 2017.
Regulatory Assets and Regulatory Liabilities
Rate-regulated utilities recognize in their financial statements certain revenues and expenses in different periods than do other enterprises. As a result, the Company and Consolidated SCE&G haveDESC has recorded regulatory assets and regulatory liabilities which are summarized in the following tables.table. Except for certain unrecovered nuclear projectNND Project costs and certain other unrecovered plant,costs referenced herein, substantially all regulatory assets are either explicitly excluded from rate base or are effectively excluded from rate base due to their being offset by related liabilities.
|
| September 30, |
|
| December 31, |
| ||
(millions) |
| 2021 |
|
| 2020 |
| ||
Regulatory assets: |
|
|
|
|
|
|
|
|
NND Project costs(1) |
| $ | 138 |
|
| $ | 138 |
|
Deferred employee benefit plan costs(2) |
|
| 8 |
|
|
| 9 |
|
Other unrecovered plant(3) |
|
| 15 |
|
|
| 14 |
|
DSM programs(4) |
|
| 22 |
|
|
| 29 |
|
AROs(5) |
|
| 2 |
|
|
| 2 |
|
Cost of fuel and purchased gas under-collections(6) |
|
| 26 |
|
|
| 1 |
|
Other |
|
| 41 |
|
|
| 36 |
|
Regulatory assets - current |
|
| 252 |
|
|
| 229 |
|
NND Project costs(1) |
|
| 2,261 |
|
|
| 2,364 |
|
AROs(5) |
|
| 314 |
|
|
| 309 |
|
Cost of reacquired debt(7) |
|
| 11 |
|
|
| 243 |
|
Deferred employee benefit plan costs(2) |
|
| 153 |
|
|
| 159 |
|
Deferred losses on interest rate derivatives(8) |
|
| 297 |
|
|
| 308 |
|
Other unrecovered plant(3) |
|
| 57 |
|
|
| 61 |
|
DSM programs(4) |
|
| 44 |
|
|
| 46 |
|
Environmental remediation costs(9) |
|
| 20 |
|
|
| 20 |
|
Deferred storm damage costs(10) |
|
| 39 |
|
|
| 45 |
|
Deferred transmission operating costs(11) |
|
| 78 |
|
|
| 63 |
|
Other(12) |
|
| 138 |
|
|
| 108 |
|
Regulatory assets - noncurrent |
|
| 3,412 |
|
|
| 3,726 |
|
Total regulatory assets |
| $ | 3,664 |
|
| $ | 3,955 |
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
Monetization of guaranty settlement(13) |
| $ | 67 |
|
| $ | 67 |
|
Income taxes refundable through future rates(14) |
|
| 43 |
|
|
| 21 |
|
Reserve for refunds to electric utility customers(15) |
|
| 121 |
|
|
| 128 |
|
Cost of fuel and purchased gas over-collections(6) |
|
| 0 |
|
|
| 58 |
|
Derivatives(16) |
|
| 22 |
|
|
| 0 |
|
Other |
|
| 17 |
|
|
| 9 |
|
Regulatory liabilities - current |
|
| 270 |
|
|
| 283 |
|
Monetization of guaranty settlement(13) |
|
| 848 |
|
|
| 903 |
|
Income taxes refundable through future rates(14) |
|
| 910 |
|
|
| 919 |
|
Asset removal costs(17) |
|
| 577 |
|
|
| 564 |
|
Deferred gains on interest rate derivatives(8) |
|
| 67 |
|
|
| 69 |
|
Reserve for refunds to electric utility customers(15) |
|
| 451 |
|
|
| 540 |
|
Derivatives(16) |
|
| 25 |
|
|
| 0 |
|
Other |
|
| 14 |
|
|
| 10 |
|
Regulatory liabilities - noncurrent |
|
| 2,892 |
|
|
| 3,005 |
|
Total regulatory liabilities |
| $ | 3,162 |
|
| $ | 3,288 |
|
(1) | Reflects expenditures associated with the NND Project, which pursuant to the SCANA Merger Approval Order, will be recovered from electric service customers over a 20-year period ending in 2039. See Note 10 for more information. |
(2) | Employee benefit plan costs have historically been recovered as they have been recorded under GAAP. Deferred employee benefit plan costs represent amounts of pension and other postretirement benefit costs which were accrued as liabilities and treated as regulatory assets pursuant to FERC guidance, and costs deferred pursuant to specific South Carolina Commission regulatory orders. DESC expects to recover deferred pension costs through utility rates over periods through 2044. DESC expects to recover other deferred benefit costs through utility rates, primarily over average service periods of participating employees up to 11 years. |
(3) | Represents the carrying value of coal-fired generating units, including related materials and supplies inventory, retired from service prior to being fully depreciated. DESC is amortizing these amounts through cost of service rates following deprecation amounts that were designed to recover the retired units’ cost over their previous estimated remaining useful lives, which has been estimated to be through 2025. Based on current projections of remaining decommissioning costs, projected recovery is expected to extend to 2028. In addition, amounts include unrecovered costs of existing meters and equipment retired from service prior to being fully depreciated as part of the Advance Metering Infrastructure project, which are being recovered through rates through 2028. Unamortized amounts are included in rate base and are earning a current return. |
(4) | Represents deferred costs associated with electric demand reduction programs, and such deferred costs are currently being recovered over three years through an approved rate rider. |
The Company | Consolidated SCE&G | |||||||||||||||
Millions of dollars | September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||
Regulatory Assets: | ||||||||||||||||
Unrecovered nuclear project costs | $ | 4,520 | — | $ | 4,520 | — | ||||||||||
Accumulated deferred income taxes | 315 | $ | 316 | 307 | $ | 307 | ||||||||||
AROs and related funding | 424 | 425 | 401 | 403 | ||||||||||||
Deferred employee benefit plan costs | 321 | 342 | 290 | 309 | ||||||||||||
Deferred losses on interest rate derivatives | 632 | 620 | 632 | 620 | ||||||||||||
Other unrecovered plant | 108 | 117 | 108 | 117 | ||||||||||||
DSM Programs | 58 | 59 | 58 | 59 | ||||||||||||
Carrying costs on deferred tax assets related to nuclear construction | 46 | 32 | 46 | 32 | ||||||||||||
Pipeline integrity management costs | 47 | 33 | 7 | 6 | ||||||||||||
Environmental remediation costs | 30 | 32 | 25 | 26 | ||||||||||||
Deferred storm damage costs | 22 | 20 | 22 | 20 | ||||||||||||
Deferred costs related to uncertain tax position | 28 | 15 | 28 | 15 | ||||||||||||
Other | 139 | 119 | 138 | 116 | ||||||||||||
Total Regulatory Assets | $ | 6,690 | $ | 2,130 | $ | 6,582 | $ | 2,030 |
(5) | Represents deferred depreciation and accretion expense related to legal obligations associated with the future retirement of generation, transmission and distribution properties. The AROs primarily relate to DESC’s electric generating facilities, including Summer, and are expected to be recovered over the related property lives and periods of decommissioning which may range up to approximately 105 years. |
(6) | Represents amounts under- or over-collected from customers pursuant to the cost of fuel and purchased gas components approved by the South Carolina Commission. |
Regulatory Liabilities: | ||||||||||||||||
Monetization of guaranty settlement | $ | 1,095 | — | $ | 1,095 | — | ||||||||||
Asset removal costs | 764 | $ | 755 | 535 | $ | 529 | ||||||||||
Deferred gains on interest rate derivatives | 135 | 151 | 135 | 151 | ||||||||||||
Other | 21 | 24 | 14 | 15 | ||||||||||||
Total Regulatory Liabilities | $ | 2,015 | $ | 930 | $ | 1,779 | $ | 695 |
(7) | During the second quarter of 2021, DESC recorded a charge of $237 million ($178 million after-tax) in impairment of assets and other charges to write-off the balance of a regulatory asset that is no longer probable of recovery under the settlement agreement approved in DESC’s retail electric base rate case. See South Carolina Electric Base Rate Casediscussed abovefor more information. |
(8) | Represents (i) the changes in fair value and payments made or received upon settlement of certain interest rate derivatives designated as cash flow hedges and (ii) the changes in fair value and payments made or received upon settlement of certain other interest rate derivatives not so designated. The amounts recorded with respect to (i) are expected to be amortized to interest expense over the lives of the underlying debt through 2043.The amounts recorded with respect to (ii) are expected to be similarly amortized to interest expense through 2065. |
(9) | Reflects amounts associated with the assessment and clean-up of sites currently or formerly owned by DESC. Such remediation costs are expected to be recovered over periods of up to 15 years. See Note 10 for more information. |
(10) | Represents storm restoration costs for which DESC expects to recover through customer rates over approximately 10 years pursuant to the settlement agreement approved in DESC’s retail electric base rate case.Unamortized amounts are included in rate base and are earning a current return. |
(11) | Includes deferred depreciation and property taxes associated with certain transmission assets for which DESC expects to recover from customers over approximately 42 years pursuant to the settlement agreement approved in DESC’s retail electric base rate case.Unamortized amounts are included in rate base and are earning a current return. |
(12) | Various other regulatory assets are expected to be recovered through rates over varying periods through 2047. |
(13) | Represents proceeds related to the monetization of the Toshiba Settlement. In accordance with the SCANA Merger Approval Order, this balance, net of amounts that may be required to satisfy liens, will be refunded to electric customers over a 20-year period ending in 2039. See Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2020. |
(14) | Includes (i) excess deferred income taxes arising from the remeasurement of deferred income taxes in connection with the enactment of the 2017 Tax Reform Act (certain of which are protected under normalization rules and will be amortized over the remaining lives of related property, and certain of which will be amortized to the benefit of customers over prescribed periods as instructed by regulators) and (ii) deferred income taxes arising from investment tax credits, offset by (iii) deferred income taxes that arise from utility operations that have not been included in customer rates (a portion of which relate to depreciation and are expected to be recovered over the remaining lives of the related property which may range up to 85 years). See Note 6 for more information. |
(15) | Reflects amounts previously collected from retail electric customers of DESC for the NND Project to be credited to customers over an estimated 11-year period effective February 2019 in connection with the SCANA Merger Approval Order. See Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2020. |
(16) | For jurisdictions subject to cost-based rate regulation, changes in the fair value of derivative instruments result in the recognition of regulatory assets or regulatory liabilities as they are expected to be recovered from or refunded to customers. |
(17) | Represents estimated net collections through depreciation rates of amounts to be expended for the removal of assets in the future. |
Regulatory assets have been recorded based on the probability of their recovery. All regulatory assets represent incurred costs that may be deferred under applicable GAAP for regulated operations. The SCPSC, the NCUCSouth Carolina Commission or the FERC has reviewed and approved through specific orders certain of the items shown as regulatory assets. OtherIn addition, regulatory assets include, but are not limited to, certain costs which have not been specifically approved for recovery by one of these regulatory agencies, including unrecovered nuclear project costs that are the subject of future regulatory proceedings as further discussed in condensed consolidated Note 9. In recordingagencies. While such costs as regulatory assets,are not currently being recovered, management believes the coststhey would be allowable under existing rate-making concepts that are embodied in rate orders or currentapplicable state law. Thelaw and expects to recover these costs are currently not being recovered, but are expected to be recovered through rates in future periods. In
3. REVENUE RECOGNITION
DESC has disaggregated operating revenues by customer class as follows:
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||||||||||||||||||||
(millions) |
| Electric |
|
| Gas |
|
| Electric |
|
| Gas |
|
| Electric |
|
| Gas |
|
| Electric |
|
| Gas |
| ||||||||
Customer class: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 366 |
|
| $ | 34 |
|
| $ | 349 |
|
| $ | 27 |
|
| $ | 912 |
|
| $ | 170 |
|
| $ | 862 |
|
| $ | 139 |
|
Commercial |
|
| 244 |
|
|
| 26 |
|
|
| 216 |
|
|
| 18 |
|
|
| 618 |
|
|
| 91 |
|
|
| 568 |
|
|
| 71 |
|
Industrial |
|
| 112 |
|
|
| 27 |
|
|
| 90 |
|
|
| 15 |
|
|
| 295 |
|
|
| 67 |
|
|
| 253 |
|
|
| 44 |
|
Other |
|
| 46 |
|
|
| 4 |
|
|
| 33 |
|
|
| 4 |
|
|
| 117 |
|
|
| 16 |
|
|
| 90 |
|
|
| 12 |
|
Revenues from contracts with customers |
|
| 768 |
|
|
| 91 |
|
|
| 688 |
|
|
| 64 |
|
|
| 1,942 |
|
|
| 344 |
|
|
| 1,773 |
|
|
| 266 |
|
Other revenues |
|
| 4 |
|
|
| 0 |
|
|
| 3 |
|
|
| 0 |
|
|
| 12 |
|
|
| 1 |
|
|
| 12 |
|
|
| 0 |
|
Total Operating Revenues |
| $ | 772 |
|
| $ | 91 |
|
| $ | 691 |
|
| $ | 64 |
|
| $ | 1,954 |
|
| $ | 345 |
|
| $ | 1,785 |
|
| $ | 266 |
|
Contract liabilities represent the future,obligation to transfer goods or services to a customer for which consideration has already been received from the customer. DESC had contract liability balances of $9 million and $5 million at September 30, 2021 and December 31, 2020, respectively. During the nine months ended September 30, 2021 and 2020, DESC recognized revenue of $4 million and $6 million, respectively, from the beginning contract liability balances as a result of deregulation, changesDESC fulfilled its obligations to provide service to its customers. Contract liabilities are recorded in state law, other changescustomer deposits and customer prepayments in the regulatory environment or changes in accounting requirements, the Company or Consolidated SCE&G could be required to write offBalance Sheets.
4. EQUITY
For all or a portion of its regulatory assets and liabilities. Such an event could have a material effect on the Company's and Consolidated SCE&G's financial statements in the period the write-off would be recorded.
In June 2017, PSNCJuly 2021, Dominion Energy issued $150$104 million of 4.18% senior notes dueshares of Dominion Energy common stock to satisfy DESC’s obligation under a settlement agreement for the FILOT litigation discussed in Note 10. In August 2021, Dominion Energy issued $45 million of shares of Dominion Energy common stock to satisfy DESC’s obligation for the initial payment under a settlement agreement with the SCDOR discussed in Note 10. In connection with these transactions, DESC recorded equity contributions from Dominion Energy in the third quarter of 2021.
There have been no material changes to the dividend restrictions affecting DESC described in Note 5 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2020.
5. LONG-TERM AND SHORT-TERM DEBT
DESC's short-term financing is supported through its access as co-borrower to Dominion Energy’s $6.0 billion joint revolving credit facility, as amended in June 30, 2047. Proceeds from this sale were2021. The facility can be used to repay short-term debt, to financefor working capital, expenditures,as support for the combined commercial paper programs of DESC, Dominion Energy, Virginia Power and Questar Gas, and for other general corporate purposes.
At September 30, 2021, DESC's share of commercial paper and letters of credit outstanding under its joint credit facility with Dominion Energy, was as follows:
(millions) |
| Facility Limit |
|
| Outstanding Commercial Paper |
|
| Outstanding Letters of Credit |
| |||
Joint revolving credit facility(1) |
| $ | 1,000 |
|
| $ | 0 |
|
| $ | 0 |
|
(1) | A maximum of $1.0 billion of the facility is available to DESC, assuming adequate capacity is available after giving effect to uses by co-borrowers Dominion Energy, Virginia Power and Questar Gas. The sub-limit for DESC is set within the facility limit but can be changed at the option of the co-borrowers multiple times per year. At September 30, 2021, the sub-limit for DESC was $500 million. If DESC has liquidity needs in excess of its sub-limit, the sub-limit may be changed or such needs may be satisfied through short-term intercompany borrowings from DESC's parent or from Dominion Energy. This credit facility matures in June 2026, with the potential to be extended by the borrowers to June 2028. The credit facility can be used to support bank borrowings and the issuance of commercial paper, as well as to support up to $1.0 billion (or the sub-limit, whichever is less) of letters of credit. |
In January 2021, DESC and GENCO each applied to FERC for a two-year short-term borrowing authorization. In March 2021, FERC granted DESC authority through March 2023 to issue short-term indebtedness (pursuant to Section 204 of the Federal Power Act) in amounts not to exceed $2.2 billion outstanding with maturity $100 million related to a nuclear fuel financing which had an imputed interest ratedates of 0.78%.
September 30, 2017 (Millions of dollars) | Total | SCANA | Consolidated SCE&G | PSNC Energy | ||||||||||||
Lines of credit: | + | |||||||||||||||
Five-year, expiring December 2020 | $ | 1,300.0 | $ | 400.0 | $ | 700.0 | $ | 200.0 | ||||||||
Fuel Company five-year, expiring December 2020 | 500.0 | — | 500.0 | — | ||||||||||||
Three-year, expiring December 2018 | 200.0 | — | 200.0 | — | ||||||||||||
Total committed long-term | 2,000.0 | 400.0 | 1,400.0 | 200.0 | ||||||||||||
Outstanding commercial paper (270 or fewer days) | 1,022.1 | 33.0 | 944.8 | 44.3 | ||||||||||||
Weighted average interest rate | 1.78 | % | 1.49 | % | 1.49 | % | ||||||||||
Letters of credit supported by LOC | 3.3 | 3.0 | 0.3 | — | ||||||||||||
Available | $ | 974.6 | $ | 364.0 | $ | 454.9 | $ | 155.7 |
December 31, 2016 (Millions of dollars) | Total | SCANA | Consolidated SCE&G | PSNC Energy | ||||||||||||
Lines of credit: | ||||||||||||||||
Five-year, expiring December 2020 | $ | 1,300.0 | $ | 400.0 | $ | 700.0 | $ | 200.0 | ||||||||
Fuel Company five-year, expiring December 2020 | 500.0 | — | 500.0 | — | ||||||||||||
Three-year, expiring December 2018 | 200.0 | — | 200.0 | — | ||||||||||||
Total committed long-term | 2,000.0 | 400.0 | 1,400.0 | 200.0 | ||||||||||||
Outstanding commercial paper (270 or fewer days) | 940.5 | 64.4 | 804.3 | 71.8 | ||||||||||||
Weighted average interest rate | 1.43 | % | 1.04 | % | 1.07 | % | ||||||||||
Letters of credit supported by LOC | 3.3 | 3.0 | 0.3 | — | ||||||||||||
Available | $ | 1,056.2 | $ | 332.6 | $ | 595.4 | $ | 128.2 |
DESC is obligated with respect to an aggregate of $67.8$68 million of industrial revenue bonds which are secured by letters of credit issued by TD Bank N.A.credit. These letters of credit expire, subject to renewal, in the fourth quarter of 2019.
In July 2021, DESC redeemed the remaining principal outstanding of $30 million of its 3.22% first mortgage bonds, plus accrued interest. The bonds would have otherwise matured in October 2021.
DESC has FERC approval to enter into an inter-company credit agreement with Dominion Energy under which DESC may have short-term borrowings outstanding up to $900 million. At September 30, 2021 and December 31, 2020, DESC had borrowings outstanding under this credit agreement totaling $623 million and $149 million, respectively, which are recorded in affiliated and related party payables in DESC’s Consolidated SCE&G participatesBalance Sheets. For the three and nine months ended September 30, 2021, DESC recorded interest charges of $2 million and $6 million, respectively. For the three and nine months ended September 30, 2020, DESC recorded interest charges of $2 million and $7 million, respectively.
Fuel Company and GENCO participated in a SCANA utility money pool until January 2021, when that utility money pool was closed, and Fuel Company and GENCO joined the Dominion Energy utility money pool with SCANA and anotherother regulated subsidiarysubsidiaries of SCANA.Dominion Energy. Money pool borrowings and investments bearbore interest at short-term market rates. Consolidated SCE&G’sFor the nine months ended September 30, 2021, DESC recorded interest income from money pool transactions of less than $1 million, and for the same period DESC recorded interest expense from money pool transactions were not significantof less than $1 million. For the three and nine months ended September 30, 2020, DESC recorded interest income from money pool transactions of less than $1 million and $2 million, respectively, and for any period presented. Consolidated SCE&Gthe same periods DESC recorded interest expense from money pool transactions of less than $1 million and $2 million, respectively. At December 31, 2020, DESC had outstanding money pool borrowings due to an affiliate of $31$206 million and investments due from an affiliate of $15 million. On its Consolidated Balance Sheet, DESC includes money pool borrowings within affiliated and related party payables and money pool investments within affiliated and related party receivables.
6. INCOME TAXES
DESC’s effective tax rate for the nine months ended September 30, 2021 is 7.2% compared to 18.2% for the nine months ended September 30, 2020. DESC’s effective tax rate for the nine months ended September 30, 2021 is primarily attributable to the nominal year-to-date pre-tax income resulting from charges in connection with the comprehensive settlement agreement discussed in Note 2.
DESC has recorded an estimate of excess deferred income tax amortization in 2021. The reversal of these excess deferred income taxes will impact the effective tax rate and rates charged to customers. See Note 3 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2020 for more information.
As of September 30, 2021, there have been no material changes in DESC’s unrecognized tax benefits. See Note 7 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of these unrecognized tax benefits.
7. DERIVATIVE FINANCIAL INSTRUMENTS
DESC’s accounting policies, objectives, and strategies for using derivative instruments are discussed in Note 2 in the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2020. DESC uses derivative instruments such as physical forwards to manage its commodity risk of its business operations. See Note 8 for further information about fair value measurements and associated valuation methods for derivatives.
Derivative assets and liabilities are presented gross on the Consolidated Balance Sheets. DESC’s derivative contracts include over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. Certain over-the-counter contracts contain contractual rights of setoff through master netting arrangements and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency or other conditions.
In general, most over-the-counter transactions are subject to collateral requirements. Types of collateral for over-the-counter contracts include cash, letters of credit and, in some cases, other forms of security, none of which are subject to restrictions. Cash collateral, as presented in the table below, is used to offset derivative assets and liabilities.
Certain of DESC’s derivative instruments contain credit-related contingent provisions. These provisions require DESC to provide collateral upon the occurrence of specific events, primarily a credit rating downgrade. If the credit-related contingent features underlying the instruments that are in a liability position and not fully collateralized with cash were fully triggered as of September 30, 2021 and December 31, 2020, DESC would have been required to post $10 million and $10 million, respectively, of additional collateral to its counterparties. The collateral that would be required to be posted includes the impacts of any amounts already posted for derivatives per contractual terms. DESC had posted $11 million and $1 million, respectively, of collateral at September 30, 2021 and December 31, 2020 related to derivatives with credit-related contingent provisions that are in a liability position and not fully collateralized with cash. The aggregate fair value of all derivative instruments with credit-related contingent provisions that are in a liability position and not fully collateralized with cash was $21 million and $11 million at September 30, 2017,2021 and $29 million at December 31, 2016. On its condensed consolidated balance sheet,2020, respectively.
The table below presents derivative balances by type of financial instrument, if the gross amounts recognized in the Consolidated SCE&G includes such amounts within Affiliated payables.Balance Sheets were netted with derivative instruments and cash collateral received or paid. DESC’s commodity derivative assets are not subject to a master netting agreement or similar arrangement.
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||||||||||||||||||||||||||
|
| Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
| Gross Amounts Not Offset in the Consolidated Balance Sheet |
| ||||||||||||||||||||||||||
(millions) |
| Gross Liabilities Presented in the Consolidated Balance Sheet(1) |
|
| Financial Instruments |
|
| Cash Collateral Paid |
|
| Net Amounts |
|
| Gross Liabilities Presented in the Consolidated Balance Sheet(1) |
|
| Financial Instruments |
|
| Cash Collateral Paid |
|
| Net Amounts |
| ||||||||
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
| $ | 21 |
|
| $ | 0 |
|
| $ | 11 |
|
| $ | 10 |
|
| $ | 27 |
|
| $ | 0 |
|
| $ | 17 |
|
| $ | 10 |
|
Total derivatives |
| $ | 21 |
|
| $ | 0 |
|
| $ | 11 |
|
| $ | 10 |
|
| $ | 27 |
|
| $ | 0 |
|
| $ | 17 |
|
| $ | 10 |
|
(1) | Excludes $1 million and $0 million of commodity derivative liabilities at September 30, 2021 and December 31, 2020, respectively, which are not subject to master netting or similar arrangements. |
Volumes
The following table presents the volume of derivative activity at September 30, 2021. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions.
|
| Current |
|
| Noncurrent |
| ||
Electricity (MWh): |
|
|
|
|
|
|
|
|
Fixed price |
|
| 1,756,930 |
|
|
| 22,928,956 |
|
Interest rate(1) (millions) |
| $ | 0 |
|
| $ | 71 |
|
(1) | Maturity is determined based on final settlement period. |
Fair Value and Gains and Losses on Derivative Instruments
The following tables present the fair values of derivatives and where they are presented in the Consolidated Balance Sheets:
(millions) |
| Fair Value - Derivatives under Hedge Accounting |
|
| Fair Value - Derivatives not under Hedge Accounting |
|
| Total Fair Value |
| |||
At September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | 0 |
|
| $ | 22 |
|
| $ | 22 |
|
Total current derivative assets(1) |
|
| 0 |
|
|
| 22 |
|
|
| 22 |
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| 0 |
|
|
| 25 |
|
|
| 25 |
|
Total noncurrent derivative assets(2) |
|
| 0 |
|
|
| 25 |
|
|
| 25 |
|
Total derivative assets |
| $ | 0 |
|
| $ | 47 |
|
| $ | 47 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
| $ | 1 |
|
| $ | 1 |
|
| $ | 2 |
|
Total current derivative liabilities(3) |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| 0 |
|
|
| 1 |
|
|
| 1 |
|
Interest rate |
|
| 12 |
|
|
| 7 |
|
|
| 19 |
|
Total noncurrent derivative liabilities(4) |
|
| 12 |
|
|
| 8 |
|
|
| 20 |
|
Total derivative liabilities |
| $ | 13 |
|
| $ | 9 |
|
| $ | 22 |
|
At December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
| $ | 1 |
|
| $ | 1 |
|
| $ | 2 |
|
Total current derivative liabilities(3) |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
| 15 |
|
|
| 10 |
|
|
| 25 |
|
Total noncurrent derivative liabilities(4) |
|
| 15 |
|
|
| 10 |
|
|
| 25 |
|
Total derivative liabilities |
| $ | 16 |
|
| $ | 11 |
|
| $ | 27 |
|
(1) | |
Current derivative assets are presented in other current assets in the Consolidated Balance Sheets. |
(2) | Noncurrent derivative assets are presented in other deferred debits and other assets in the Consolidated Balance Sheets. |
(3) | Current derivative liabilities are presented in other current liabilities in the Consolidated Balance Sheets. |
(4) | Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in the Consolidated Balance Sheets. |
The IRS has completed examinations offollowing tables present the Company’s federal returns through 2004, and the Company’s federal returns through 2007 are closed for additional assessment. The IRS is currently examining SCANA's open federal returns through 2015 as a result of claims discussed below. With few exceptions, the Company, including Consolidated SCE&G, is no longer subject to state and local income tax examinations by tax authorities for years before 2010.
Commodity and Other Energy Management Contracts (in MMBTU) | |||||||||
Hedge designation | Gas Distribution | Gas Marketing | Total | ||||||
As of September 30, 2017 | |||||||||
Commodity contracts | 8,330,000 | 16,723,000 | 25,053,000 | ||||||
Energy management contracts (a) | — | 46,346,530 | 46,346,530 | ||||||
Total (a) | 8,330,000 | 63,069,530 | 71,399,530 | ||||||
As of December 31, 2016 | |||||||||
Commodity contracts | 4,510,000 | 11,947,000 | 16,457,000 | ||||||
Energy management contracts (a) | — | 67,447,223 | 67,447,223 | ||||||
Total (a) | 4,510,000 | 79,394,223 | 83,904,223 |
Interest Rate Swaps | ||||||||||||||||
The Company | Consolidated SCE&G | |||||||||||||||
Millions of dollars | September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||
Designated as hedging instruments | $ | 111.2 | $ | 115.6 | $ | 36.4 | $ | 36.4 | ||||||||
Not designated as hedging instruments | 1,285.0 | 1,285.0 | 1,285.0 | 1,285.0 |
Fair Values of Derivative Instruments | ||||||||||||||||||
The Company | Consolidated SCE&G | |||||||||||||||||
Millions of dollars | Balance Sheet Location | Asset | Liability | Asset | Liability | |||||||||||||
As of September 30, 2017 | ||||||||||||||||||
Designated as hedging instruments | ||||||||||||||||||
Interest rate contracts | ||||||||||||||||||
Derivative financial instruments | — | $ | 3 | — | $ | 1 | ||||||||||||
Other deferred credits and other liabilities | — | 25 | — | 9 | ||||||||||||||
Commodity contracts | ||||||||||||||||||
Prepayments | — | 1 | — | — | ||||||||||||||
Derivative financial instruments | $ | 1 | 1 | — | — | |||||||||||||
Total | $ | 1 | $ | 30 | — | $ | 10 | |||||||||||
Not designated as hedging instruments | ||||||||||||||||||
Interest rate contracts | ||||||||||||||||||
Other deferred debits and other assets | $ | 56 | — | $ | 56 | — | ||||||||||||
Derivative financial instruments | — | $ | 40 | — | $ | 40 | ||||||||||||
Other deferred credits and other liabilities | — | 4 | — | 4 | ||||||||||||||
Commodity contracts | ||||||||||||||||||
Prepayments | 1 | — | — | — | ||||||||||||||
Energy management contracts | ||||||||||||||||||
Prepayments | 2 | 1 | — | — | ||||||||||||||
Other current assets | 2 | — | — | — | ||||||||||||||
Other deferred debits and other assets | 1 | — | — | — | ||||||||||||||
Derivative financial instruments | — | 2 | — | — | ||||||||||||||
Other deferred credits and other liabilities | — | 1 | — | — | ||||||||||||||
Total | $ | 62 | $ | 48 | $ | 56 | $ | 44 | ||||||||||
As of December 31, 2016 | ||||||||||||||||||
Designated as hedging instruments | ||||||||||||||||||
Interest rate contracts | ||||||||||||||||||
Derivative financial instruments | — | $ | 4 | — | $ | 1 | ||||||||||||
Other deferred credits and other liabilities | — | 24 | — | 8 | ||||||||||||||
Commodity contracts | ||||||||||||||||||
Prepayments | $ | 5 | — | — | — | |||||||||||||
Other current assets | 1 | — | — | — | ||||||||||||||
Total | $ | 6 | $ | 28 | — | $ | 9 | |||||||||||
Not designated as hedging instruments | ||||||||||||||||||
Interest rate contracts | ||||||||||||||||||
Other deferred debits and other assets | $ | 71 | — | $ | 71 | — | ||||||||||||
Derivative financial instruments | — | $ | 27 | — | $ | 27 | ||||||||||||
Other deferred credits and other liabilities | — | 3 | — | 3 | ||||||||||||||
Commodity contracts | ||||||||||||||||||
Other current assets | 3 | — | — | — | ||||||||||||||
Energy management contracts | ||||||||||||||||||
Prepayments | 6 | 2 | — | — | ||||||||||||||
Other current assets | 2 | 1 | — | — | ||||||||||||||
Other deferred debits and other assets | 2 | — | — | — | ||||||||||||||
Derivative financial instruments | — | 4 | — | — | ||||||||||||||
Other deferred credits and other liabilities | — | 2 | — | — | ||||||||||||||
Total | $ | 84 | $ | 39 | $ | 71 | $ | 30 |
Derivatives in Cash Flow Hedging Relationships
(millions) | Increase (Decrease) in Derivatives Subject to Regulatory Treatment(1) |
| |
Three Months Ended September 30, 2021 |
|
|
|
Derivative type and location of gains (losses): |
|
|
|
Interest rate | $ | 1 |
|
Total | $ | 1 |
|
Three Months Ended September 30, 2020 |
|
|
|
Derivative type and location of gains (losses): |
|
|
|
Interest rate | $ | 2 |
|
Total | $ | 2 |
|
Nine Months Ended September 30, 2021 |
|
|
|
Derivative type and location of gains (losses): |
|
|
|
Interest rate | $ | 7 |
|
Total | $ | 7 |
|
Nine Months Ended September 30, 2020 |
|
|
|
Derivative type and location of gains (losses): |
|
|
|
Interest rate | $ | (2 | ) |
Total | $ | (2 | ) |
(1) | Represents net derivative activity deferred into and amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/ liabilities have no associated effect in the Consolidated Statements of Comprehensive Income. |
Derivatives Not Designated as Hedging Instrument
(millions) |
|
|
| Amount of Gain (Loss) Recognized in Income on Derivatives(1) |
| |||||
Three Months Ended September 30, |
| Location |
| 2021 |
|
| 2020 |
| ||
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
| Purchased power |
| $ | 3 |
|
| $ | 0 |
|
Interest rate contracts |
| Interest charges |
|
| 0 |
|
|
| 0 |
|
Total |
|
|
| $ | 3 |
|
| $ | 0 |
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
| Purchased power |
| $ | 3 |
|
| $ | 0 |
|
Interest rate contracts |
| Interest charges |
|
| (1 | ) |
|
| (1 | ) |
Total |
|
|
| $ | 2 |
|
| $ | (1 | ) |
(1) | Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in the Consolidated Statements of Comprehensive Income. |
The Company and Consolidated SCE&G: | ||||||||||||||||||
Loss Deferred in Regulatory Accounts | Loss Reclassified from Deferred Accounts into Income | |||||||||||||||||
Millions of dollars | 2017 | 2016 | Location | 2017 | 2016 | |||||||||||||
Three Months Ended September 30, | ||||||||||||||||||
Interest rate contracts | — | $ | (1 | ) | Interest expense | — | $ | (1 | ) | |||||||||
Nine Months Ended September 30, | ||||||||||||||||||
Interest rate contracts | $ | (1 | ) | $ | (6 | ) | Interest expense | $ | (1 | ) | $ | (2 | ) |
The Company: | ||||||||||||||||||
Gain (Loss) Recognized in OCI, net of tax | Gain (Loss) Reclassified from AOCI into Income, net of tax | |||||||||||||||||
Millions of dollars | 2017 | 2016 | Location | 2017 | 2016 | |||||||||||||
Three Months Ended September 30, | ||||||||||||||||||
Interest rate contracts | — | $ | 1 | Interest expense | $ | (2 | ) | $ | (2 | ) | ||||||||
Commodity contracts | — | (2 | ) | Gas purchased for resale | — | — | ||||||||||||
Total | — | $ | (1 | ) | $ | (2 | ) | $ | (2 | ) | ||||||||
Nine Months Ended September 30, | ||||||||||||||||||
Interest rate contracts | $ | (1 | ) | $ | (4 | ) | Interest expense | $ | (6 | ) | $ | (6 | ) | |||||
Commodity contracts | (4 | ) | — | Gas purchased for resale | 2 | (6 | ) | |||||||||||
Total | $ | (5 | ) | $ | (4 | ) | $ | (4 | ) | $ | (12 | ) |
8. FAIR VALUE MEASUREMENTS, INCLUDING DERIVATIVES
DESC’s fair value measurements are made in accordance with the Company expects that duringpolicies discussed in Note 9 to the next 12 months reclassifications from AOCIConsolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2020. See Note 7 in this report for further information about DESC’s derivatives and hedge accounting activities. DESC applies fair value measurements to earnings arising from cash flow hedges will include approximately $0.8 million as an increase to gas cost, assuming natural gas markets remain at their current levels,certain assets and approximately $6.6 million as an increase to interest expense. As of September 30, 2017, all of the Company’sliabilities including commodity cash flow hedges settle by their terms before the end of the fourth quarter of 2019.
Derivatives Not designated as Hedging Instruments | |||||||||||
The Company and Consolidated SCE&G: | |||||||||||
Millions of dollars | Loss Deferred in Regulatory Accounts | Location | Loss Reclassified from Deferred Accounts into Income | ||||||||
Three Months Ended September 30, 2017 | |||||||||||
Interest rate contracts | $ | (6 | ) | Interest Expense | $ | (1 | ) | ||||
Nine Months Ended September 30, 2017 | |||||||||||
Interest rate contracts | $ | (30 | ) | Interest Expense | $ | (2 | ) | ||||
Three Months Ended September 30, 2016 | |||||||||||
Interest rate contracts | $ | (24 | ) | Other Income | $ | (1 | ) | ||||
Nine Months Ended September 30, 2016 | |||||||||||
Interest rate contracts | $ | (268 | ) | Other Income | $ | (1 | ) |
Inputs and Assumptions
When evaluating pricing information provided by Designated Contract Market settlement pricing, other pricing services, or brokers, DESC considers the Companyability to transact at the quoted price, i.e. if the quotes are based on an active market or an inactive market and Consolidated SCE&G expects that during the next 12 months reclassifications from regulatory accounts to earnings arising from derivatives not designated as hedges will include $3.2 million as an increase to interest expense.
Derivative Contracts with Credit Contingent Features | ||||||||||||||||
The Company | Consolidated SCE&G | |||||||||||||||
Millions of dollars | September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||
in Net Liability Position | ||||||||||||||||
Aggregate fair value of derivatives in net liability position | $ | 67.1 | $ | 50.3 | $ | 47.7 | $ | 30.3 | ||||||||
Fair value of collateral already posted | 31.0 | 29.2 | 10.3 | 9.2 | ||||||||||||
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | $ | 36.1 | $ | 21.1 | $ | 37.4 | $ | 21.1 | ||||||||
in Net Asset Position | ||||||||||||||||
Aggregate fair value of derivatives in net asset position | $ | 49.0 | $ | 62.9 | $ | 49.0 | $ | 62.0 | ||||||||
Fair value of collateral already posted | — | — | — | — | ||||||||||||
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | $ | 49.0 | $ | 62.9 | $ | 49.0 | $ | 62.0 |
available, or if DESC believes that observable pricing is not indicative of fair value, judgment is required to develop the estimates of fair value. In those cases the unobservable inputs are developed and substantiated using historical information, available market data, third-party data and statistical analysis. Periodically, inputs to valuation models are reviewed and revised as needed, based on historical information, updated market data, market liquidity and relationships and changes in third-party sources. The inputs and assumptions used in measuring fair value include the following for commodity derivative assets and derivative liabilities follows:
Derivative Assets | The Company | Consolidated SCE&G | ||||||||||||||||||
Millions of dollars | Interest Rate Contracts | Commodity Contracts | Energy Management Contracts | Total | Interest Rate Contracts | |||||||||||||||
As of September 30, 2017 | ||||||||||||||||||||
Gross Amounts of Recognized Assets | $ | 56 | $ | 2 | $ | 5 | $ | 63 | $ | 56 | ||||||||||
Gross Amounts Offset in Statement of Financial Position | — | (1 | ) | (2 | ) | (3 | ) | — | ||||||||||||
Net Amounts Presented in Statement of Financial Position | 56 | 1 | 3 | 60 | 56 | |||||||||||||||
Gross Amounts Not Offset - Financial Instruments | (7 | ) | — | — | (7 | ) | (7 | ) | ||||||||||||
Gross Amounts Not Offset - Cash Collateral Received | — | — | — | — | — | |||||||||||||||
Net Amount | $ | 49 | $ | 1 | $ | 3 | $ | 53 | $ | 49 | ||||||||||
Balance sheet location | ||||||||||||||||||||
Prepayments | $ | 1 | — | |||||||||||||||||
Other current assets | 2 | — | ||||||||||||||||||
Other deferred debits and other assets | 57 | $ | 56 | |||||||||||||||||
Total | $ | 60 | $ | 56 | ||||||||||||||||
As of December 31, 2016 | ||||||||||||||||||||
Gross Amounts of Recognized Assets | $ | 71 | $ | 9 | $ | 10 | $ | 90 | $ | 71 | ||||||||||
Gross Amounts Offset in Statement of Financial Position | — | — | (4 | ) | (4 | ) | — | |||||||||||||
Net Amounts Presented in Statement of Financial Position | 71 | 9 | 6 | 86 | 71 | |||||||||||||||
Gross Amounts Not Offset - Financial Instruments | (9 | ) | — | — | (9 | ) | (9 | ) | ||||||||||||
Gross Amounts Not Offset - Cash Collateral Received | — | — | — | — | — | |||||||||||||||
Net Amount | $ | 62 | $ | 9 | $ | 6 | $ | 77 | $ | 62 | ||||||||||
Balance sheet location | ||||||||||||||||||||
Prepayments | $ | 9 | — | |||||||||||||||||
Other current assets | 5 | — | ||||||||||||||||||
Other deferred debits and other assets | 72 | $ | 71 | |||||||||||||||||
Total | $ | 86 | $ | 71 |
Derivative Liabilities | The Company | Consolidated SCE&G | ||||||||||||||||||
Millions of dollars | Interest Rate Contracts | Commodity Contracts | Energy Management Contracts | Total | Interest Rate Contracts | |||||||||||||||
As of September 30, 2017 | ||||||||||||||||||||
Gross Amounts of Recognized Liabilities | $ | 72 | $ | 2 | $ | 4 | $ | 78 | $ | 54 | ||||||||||
Gross Amounts Offset in Statement of Financial Position | — | (1 | ) | (2 | ) | (3 | ) | — | ||||||||||||
Net Amounts Presented in Statement of Financial Position | 72 | 1 | 2 | 75 | 54 | |||||||||||||||
Gross Amounts Not Offset - Financial Instruments | (7 | ) | — | — | (7 | ) | (7 | ) | ||||||||||||
Gross Amounts Not Offset - Cash Collateral Posted | (30 | ) | — | (1 | ) | (31 | ) | (10 | ) | |||||||||||
Net Amount | $ | 35 | $ | 1 | $ | 1 | $ | 37 | $ | 37 | ||||||||||
Balance sheet location | ||||||||||||||||||||
Prepayments | $ | 1 | — | |||||||||||||||||
Derivative financial instruments | 45 | $ | 41 | |||||||||||||||||
Other deferred credits and other liabilities | 29 | 13 | ||||||||||||||||||
Total | $ | 75 | $ | 54 | ||||||||||||||||
As of December 31, 2016 | ||||||||||||||||||||
Gross Amounts of Recognized Liabilities | $ | 58 | — | $ | 9 | $ | 67 | $ | 39 | |||||||||||
Gross Amounts Offset in Statement of Financial Position | — | — | (3 | ) | (3 | ) | — | |||||||||||||
Net Amounts Presented in Statement of Financial Position | 58 | — | 6 | 64 | 39 | |||||||||||||||
Gross Amounts Not Offset - Financial Instruments | (9 | ) | — | — | (9 | ) | (9 | ) | ||||||||||||
Gross Amounts Not Offset - Cash Collateral Posted | (29 | ) | — | — | (29 | ) | (9 | ) | ||||||||||||
Net Amount | $ | 20 | — | $ | 6 | $ | 26 | $ | 21 | |||||||||||
Balance sheet location | ||||||||||||||||||||
Derivative financial instruments | $ | 35 | $ | 28 | ||||||||||||||||
Other deferred credits and other liabilities | 29 | 11 | ||||||||||||||||||
Total | $ | 64 | $ | 39 |
• | Forward commodity prices | |
• | Transaction prices | |
• | Volumes | |
• | Commodity location | |
• | Interest rates | |
• | Credit quality of counterparties and the Companies | |
• | Credit enhancements | |
• | Time value |
Level 3 Valuations
DESC enters into physical forwards contracts, which are considered Level 3 as they have one or more inputs that are not observable and are significant to the NASDAQ, where the securities are actively traded. For commodity derivative and energy management assets and liabilities, the Company uses unadjusted NYMEX prices to determine fair value, and considers such measures of fair value to be Level 1 for exchange traded instruments and Level 2 for over-the-counter instruments.valuation. The Company’s and Consolidated SCE&G's interest rate swap agreements are valued using discounted cash flow models with independently sourced data. Fairmethod is used to value measurements,Level 3 physical forwards contracts. The discounted cash flow model for forwards calculates mark-to-market valuations based on forward market prices, original transaction prices, volumes, risk-free rate of return, and the level within the fair value hierarchy
As of September 30, 2017 | As of December 31, 2016 | |||||||||||||||||||||||
The Company | Consolidated SCE&G | The Company | Consolidated SCE&G | |||||||||||||||||||||
Millions of dollars | Level 1 | Level 2 | Level 2 | Level 1 | Level 2 | Level 2 | ||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Available for sale securities | $ | 19 | — | — | $ | 14 | — | — | ||||||||||||||||
Held to maturity securities | — | $ | 7 | — | — | $ | 7 | — | ||||||||||||||||
Interest rate contracts | — | 56 | $ | 56 | — | 71 | $ | 71 | ||||||||||||||||
Commodity contracts | 1 | 1 | — | 8 | 1 | — | ||||||||||||||||||
Energy management contracts | 2 | 3 | — | 6 | 4 | — | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Interest rate contracts | — | 72 | 54 | — | 58 | 39 | ||||||||||||||||||
Commodity contracts | 1 | 1 | — | — | — | — | ||||||||||||||||||
Energy management contracts | 1 | 5 | — | 2 | 10 | — |
The following table presents DESC’s quantitative information about Level 3 fair value measurements at September 30, 2021. The range and weighted average are presented in dollars for either period presented,market price inputs.
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| Fair Value (millions) |
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| Valuation Techniques |
| Unobservable Input |
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| Range |
| Weighted Average(1) |
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Assets |
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Physical forwards: |
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Electricity |
| $ | 47 |
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| Discounted cash flow |
| Market price (per MWh) | (2) |
| 24 - 77 |
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| 38 |
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Total assets |
| $ | 47 |
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Liabilities |
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Physical forwards: |
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Electricity |
| $ | 1 |
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| Discounted cash flow |
| Market price (per MWh) | (2) |
| 24 - 60 |
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| 37 |
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Total liabilities |
| $ | 1 |
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(1) Averages weighted by volume. |
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(2) Represents market prices beyond defined terms for Levels 1 and 2. |
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Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:
Significant Unobservable Inputs | Position | Change to Input | Impact on Fair Value Measurement | |||
Market price | Buy | Increase (decrease) | Gain (loss) | |||
Market price | Sell | Increase (decrease) | Loss (gain) |
Nonrecurring Fair Value Measurement
During the third quarter of 2020, DESC determined that certain of its nonutility property was impaired and thererecorded a $12 million charge ($9 million after-tax) within impairments and other charges in its Consolidated Statements of Income to adjust the property down to its estimated fair value of $6 million. The fair value determinations are considered Level 2 fair value measurements due to the use of real estate appraised values.
Recurring Fair Value Measurements
The following table presents DESC’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:
(millions) |
| Level 1 |
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| Level 2 |
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| Level 3 |
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| Total |
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At September 30, 2021 |
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Assets |
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Commodity |
| $ | 0 |
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| $ | 0 |
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| $ | 47 |
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| $ | 47 |
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Total assets |
| $ | 0 |
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| $ | 0 |
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| $ | 47 |
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| $ | 47 |
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Liabilities |
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Commodity |
| $ | 0 |
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| $ | 0 |
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| $ | 1 |
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| $ | 1 |
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Interest rate |
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| 0 |
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| 21 |
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| 0 |
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| 21 |
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Total liabilities |
| $ | 0 |
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| $ | 21 |
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| $ | 1 |
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| $ | 22 |
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At December 31, 2020 |
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Liabilities |
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Interest rate |
| $ | 0 |
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| $ | 27 |
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| $ | 0 |
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| $ | 27 |
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Total liabilities |
| $ | 0 |
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| $ | 27 |
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| $ | 0 |
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| $ | 27 |
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The following table presents the net change in DESC's assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category. There were no transfersnet changes in assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category for the three and nine months ended September 30, 2020.
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| Three Months Ended |
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| Nine Months Ended |
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| September 30, |
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| September 30 |
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| 2021 |
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| 2021 |
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(millions) |
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Beginning balance |
| $ | (13 | ) |
| $ | 0 |
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Total realized and unrealized gains (losses): |
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Included in earnings: |
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Purchased power |
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| 3 |
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| 3 |
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Included in regulatory assets/liabilities |
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| 59 |
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| 46 |
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Settlements |
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| (3 | ) |
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| (3 | ) |
Ending balance |
| $ | 46 |
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| $ | 46 |
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There are 0 unrealized gains and losses included in earnings in the Level 3 fair value category related to assets/liabilities still held at the reporting date for the three and nine months ended September 30, 2021.
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Fair Value of Financial Instruments
Substantially all of DESC’s financial instruments are recorded at fair value, with the exception of the instruments described below, which are reported at historical cost. Estimated fair values have been determined using available market information and valuation methodologies considered appropriate by management. The carrying amount of financial instruments classified within current assets and current liabilities are representative of fair value amounts into or outbecause of Levels 1, 2 or 3 during the periods presented.
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| September 30, 2021 |
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| December 31, 2020 |
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(millions) |
| Carrying Amount |
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| Estimated Fair Value(1) |
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| Carrying Amount |
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| Estimated Fair Value(1) |
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Long-term debt(2) |
| $ | 3,327 |
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| $ | 4,468 |
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| $ | 3,360 |
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| $ | 4,748 |
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Affiliated long-term debt |
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| 230 |
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| 230 |
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| 230 |
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| 230 |
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(1) | Fair value is estimated using market prices, where available, and interest rates currently available for issuance of debt with similar terms and remaining maturities. All fair value measurements are classified as Level 2. The carrying amount of debt issuances with short-term maturities and variable rates refinanced at current market rates is a reasonable estimate of their fair value. |
Long-Term Debt | September 30, 2017 | December 31, 2016 | ||||||||||||||
Millions of dollars | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||
The Company | $ | 6,632.4 | $ | 7,462.9 | $ | 6,489.8 | $ | 7,183.3 | ||||||||
Consolidated SCE&G | 5,162.5 | 5,836.9 | 5,166.0 | 5,752.3 |
(2) Carrying amount includes current portions included in securities due within one year and amounts which represent the unamortized debt issuance costs and discount or premium.
9. EMPLOYEE BENEFIT PLANS
Components of net periodic benefit cost recorded by the Company and Consolidated SCE&GDESC were as follows:
(millions) |
| Pension Benefits |
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| Other Postretirement Benefits |
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Three Months Ended September 30, |
| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Service cost |
| $ | 3 |
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| $ | 3 |
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| $ | 0 |
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| $ | 1 |
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Interest cost |
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| 5 |
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| 6 |
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| 1 |
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| 2 |
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Expected return on assets |
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| (12 | ) |
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| (11 | ) |
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| 0 |
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| 0 |
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Amortization of actuarial losses |
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| 1 |
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| 2 |
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| 0 |
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| 0 |
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Net periodic benefit cost (credit) |
| $ | (3 | ) |
| $ | 0 |
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| $ | 1 |
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| $ | 3 |
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Nine Months Ended September 30, |
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Service cost |
| $ | 7 |
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| $ | 10 |
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| $ | 1 |
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| $ | 3 |
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Interest cost |
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| 15 |
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| 18 |
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| 4 |
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| 6 |
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Expected return on assets |
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| (36 | ) |
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| (33 | ) |
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| 0 |
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| 0 |
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Amortization of actuarial losses |
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| 4 |
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| 5 |
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| 0 |
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| 0 |
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Net periodic benefit cost (credit) |
| $ | (10 | ) |
| $ | 0 |
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| $ | 5 |
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| $ | 9 |
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The Company | Pension Benefits | Other Postretirement Benefits | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Three months ended September 30, | ||||||||||||||||
Service cost | $ | 5.7 | $ | 4.4 | $ | 1.0 | $ | 0.8 | ||||||||
Interest cost | 9.2 | 9.8 | 2.8 | 3.0 | ||||||||||||
Expected return on assets | (13.4 | ) | (13.8 | ) | — | — | ||||||||||
Prior service cost amortization | 0.4 | 1.0 | — | 0.1 | ||||||||||||
Amortization of actuarial losses | 4.4 | 3.7 | — | 0.2 | ||||||||||||
Net periodic benefit cost | $ | 6.3 | $ | 5.1 | $ | 3.8 | $ | 4.1 |
Nine months ended September 30, | ||||||||||||||||
Service cost | $ | 16.3 | $ | 15.5 | $ | 3.4 | $ | 3.3 | ||||||||
Interest cost | 28.0 | 29.5 | 8.6 | 9.1 | ||||||||||||
Expected return on assets | (41.0 | ) | (41.9 | ) | — | — | ||||||||||
Prior service cost amortization | 1.2 | 3.0 | — | 0.2 | ||||||||||||
Amortization of actuarial losses | 12.2 | 11.1 | 0.8 | 0.4 | ||||||||||||
Net periodic benefit cost | $ | 16.7 | $ | 17.2 | $ | 12.8 | $ | 13.0 |
Consolidated SCE&G | Pension Benefits | Other Postretirement Benefits | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Three months ended September 30, | ||||||||||||||||
Service cost | $ | 4.8 | $ | 3.6 | $ | 0.8 | $ | 0.7 | ||||||||
Interest cost | 7.8 | 8.3 | 2.3 | 2.5 | ||||||||||||
Expected return on assets | (11.4 | ) | (11.7 | ) | — | — | ||||||||||
Prior service cost amortization | 0.3 | 0.8 | — | 0.1 | ||||||||||||
Amortization of actuarial losses | 3.7 | 3.2 | — | 0.1 | ||||||||||||
Net periodic benefit cost | $ | 5.2 | $ | 4.2 | $ | 3.1 | $ | 3.4 |
Nine months ended September 30, | ||||||||||||||||
Service cost | $ | 13.6 | $ | 12.7 | $ | 2.8 | $ | 2.7 | ||||||||
Interest cost | 24.0 | 25.0 | 7.1 | 7.5 | ||||||||||||
Expected return on assets | (35.0 | ) | (35.5 | ) | — | — | ||||||||||
Prior service cost amortization | 1.0 | 2.5 | — | 0.2 | ||||||||||||
Amortization of actuarial losses | 10.4 | 9.4 | 0.6 | 0.3 | ||||||||||||
Net periodic benefit cost | $ | 14.0 | $ | 14.1 | $ | 10.5 | $ | 10.7 |
During the three and nine months ended September 30, 2021, DESC made no contributions to theits pension trust is expected for the foreseeable future based on current market conditions and assumptions, nor is a limitation on benefit payments expecteddoes not expect to apply. SCE&Gmake any such contributions in 2021. DESC recovers current pension costs through either a rate rider that may be adjusted annually for retail electric operations or through cost of service rates for gas operations. PSNC Energy recovers pension costs
10. COMMITMENTS AND CONTINGENCIES
As a result of issues generated in the ordinary course of business, DESC is involved in legal proceedings before various courts and is periodically subject to governmental examinations (including by regulatory authorities), inquiries and investigations. Certain legal proceedings and governmental examinations involve demands for unspecified amounts of damages, are in an initial procedural phase, involve uncertainty as to the outcome of pending appeals or motions, or involve significant factual issues that need to be resolved, such that it is not possible for DESC to estimate a range of possible loss. For such matters that DESC cannot estimate, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through costthe litigation or investigative processes such that DESC is able to estimate a range of service rates.
Environmental Matters
DESC is subject to $13.4 billion for public liability claims that could arisecosts resulting from a single nuclear incident. Each nuclear plant is insured against this liabilitynumber of federal, state and local laws and regulations designed to protect human health and the environment. These laws and regulations affect future planning and existing operations. They can result in increased capital, operating and other costs as a maximumresult of $450 million by ANIcompliance, remediation, containment and monitoring obligations.
From a regulatory perspective, DESC and GENCO continually monitor and evaluate their current and projected emission levels and strive to comply with the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of commercial nuclear reactors. Each reactor licensee is liable for up to $127.3 million per reactor owned for each nuclear incident occurring at any reactorstate and federal regulations regarding those emissions. DESC and GENCO participate in the United States, provided that not more than $18.9 millionSO2 and NOX emission allowance programs with respect to coal plant emissions and also have constructed additional pollution control equipment at their coal-fired electric generating plants. These actions are expected to address many of the liability per reactor would be assessed per year. SCE&G’s maximum assessment, based on its two-thirds ownershiprules and regulations discussed herein.
Air
The CAA, as amended, is a comprehensive program utilizing a broad range of Unit 1, would be $84.8 million per incident, but notregulatory tools to protect and preserve the nation's air quality. At a minimum, states are required to establish regulatory programs to meet applicable requirements of the CAA. However, states may choose to develop regulatory programs that are more than $12.6 million per year. Both the maximum assessment per reactor and the maximum yearly assessment are adjusted for inflation at least every five years.
Ozone Standards
The EPA published final non-attainment designations for the policy limits of insurance,October 2015 ozone standard in June 2018 with states required to develop plans to address the new standard. Until the states have developed implementation plans for the standard, DESC is unable to predict whether or to what extent the extent such insurance becomes unavailable in the future, andnew rules will ultimately require additional controls. The expenditures required to the extent that SCE&G's rates would not recover the cost of any purchased replacement power, SCE&G will retain the risk of loss as a self-insurer. SCE&G has no reason to anticipate a serious nuclear or other incident. However, if such an incident were to occur, it likely wouldimplement additional controls could have a material impact on the Company’s and Consolidated SCE&G'sDESC’s results of operations and cash flows and financial position.
ACE Rule
In July 2019, the EPA published the final rule informally referred to as agent for Santee Cooper, entered into the EPC Contract with the Consortium in 2008ACE Rule, as a replacement for the design and constructionClean Power Plan. The ACE Rule regulated GHG emissions from existing coal-fired power plants pursuant to Section 111(d) of the New Units. SCE&G's ownership share inCAA and required states to develop plans by July 2022 establishing unit-specific performance standards for existing coal-fired power plants. In January 2021, the U.S. Court of Appeals for the D.C. Circuit vacated the ACE Rule and remanded it to the EPA. This decision would take effect upon issuance of the court’s mandate. In March 2021, the court issued a partial mandate vacating and remanding all parts of the ACE Rule except for the portion of the ACE Rule that repealed the Clean Power Plan. In October 2021, the U.S. Supreme Court agreed to hear a challenge of the U.S. Court of Appeals for the D.C. Circuit’s decision on the ACE Rule. While the EPA has stated its intention to replace the ACE Rule, it is unknown at this time if or how the EPA will issue a replacement for the ACE Rule and how that replacement will affect DESC’s operations, financial condition and/or cash flows.
Carbon Regulations
In August 2016, the EPA issued a draft rule proposing to reaffirm that a source’s obligation to obtain a PSD or Title V permit for GHGs is triggered only if such permitting requirements are first triggered by non-GHG, or conventional, pollutants that are regulated by the New Units is 55%. As discussed below, various difficulties were encountered in connection withSource Review program, and exceed a significant emissions rate of 75,000 tons per year of CO2 equivalent emissions. Until the project. The ability ofEPA ultimately takes final action on this rulemaking, DESC cannot predict the Consortiumimpact to adhere to established budgets and construction schedules was affected by many variables, including unanticipated difficulties encountered in connection with project engineering and the construction of project components, constrained financial resources of the contractors, regulatory, legal, training and construction processes associated with securing approvals, permits and licenses and necessary amendments to them within projected timeframes, the availability of labor and materials at estimated costs, the
In December 2018, the EPA proposed revised Standards of Performance for Greenhouse Gas Emissions from New, Modified, and in light of Santee Cooper's decision to suspend construction onReconstructed Stationary Sources. The proposed rule would amend the New Units, on July 31, 2017, the Company determined to stop the construction of the New Units and to pursue recovery of costs incurred in connection with such construction under the abandonment provisions of the BLRA or through a general rate case or other regulatory means.
Water
The CWA, as amended, is a portion of its computer memory business as then anticipated by Toshiba, would enable it to continue to operate as a going concern. However, there could be no assurance that such sales or other actions would be successful.
Regulation 316(b)
In October 2014, the Chair and Vice-Chairfinal regulations under Section 316(b) of the South Carolina House Utility Ratepayer Protection Committee requestedCWA that SLED conduct a criminal investigation into the handling of thegovern existing facilities and new nuclear project by SCANA and SCE&G. In October 2017, the staff of the SEC's Division of Enforcement also issued a subpoena for documents related to an investigation they are conducting related to the new nuclear project. The Company and Consolidated SCE&G intend to fully cooperate with these investigations. Also in connection with the abandonment of the new nuclear project, various state or local governmental authorities may attempt to challenge, reverse or revoke one or more previously-approved tax or economic development incentives, benefits or exemptions and may attempt to apply such action retroactively. No assurance can be given as to the timing or outcome of these matters.
Effluent Limitations Guidelines
In September 2015, the EPA released a final rule to revise the ELG Rule. The final rule established updated standards for wastewater discharges that apply primarily at coal and oil steam generating stations. Affected facilities are expectedrequired to convert from wet to dry or closed cycle coal ash management, improve existing wastewater treatment systems and/or install new wastewater treatment technologies in order to meet the new discharge limits. In April 2017, the EPA granted two separate petitions for reconsideration of the final ELG Rule and stayed future compliance dates in the rule. Also in April 2017, the U.S. Court of Appeals for the Fifth Circuit granted the EPA’s request for a stay of the pending consolidated litigation challenging the rule while the EPA addresses the petitions for reconsideration. In September 2017, the EPA signed a rule to postpone the earliest compliance dates for certain waste streams regulations in the final ELG Rule from November 2018 to November 2020; however, the latest date for compliance for these regulations was December 2023. In October 2020, the EPA released the final rule that extends the latest dates for compliance. Individual facilities’ compliance dates will vary based on circumstances and the determination by state regulators and may range from 2021 to 2028. While the impacts of this rule could be material to DESC’s results of operations, financial condition and/or cash flows, as DESC expects that wastewater treatment technology retrofits and modifications to the bottom ash handling systems at the Williams and Wateree generating stations will be required, the existing regulatory framework in South Carolina provides rate recovery mechanisms that could substantially mitigate any such impacts for DESC.
Capacity Use Area
In November 2019, a new CUA was established in the counties surrounding the Cope Generating Station (Western Capacity Use Area) under the South Carolina Groundwater Use and Reporting Regulation. Under the regulation any groundwater well in a CUA that withdraws above three million gallons per month must be permitted. The Cope Generating Station is located within this new Western Capacity Use Area. Cope has been using four deep groundwater wells for cooling water and other house loads since 1996. Prior to designation of the new Western Capacity Use Area, the wells at Cope Station were only required to be recoverable through rates.
Waste Management and Remediation
The EPA's final ruleoperations of DESC are subject to a variety of state and federal laws and regulations governing the management and disposal of solid and hazardous waste, and release of hazardous substances associated with current and/or historical operations. The CERCLA, as amended, and similar state laws, may impose joint, several and strict liability for CCR became effective in the fourth quartercleanup on potentially responsible parties who owned, operated or arranged for disposal at facilities affected by a release of 2015. This rule regulates CCRhazardous substances. In addition, many states have created programs to incentivize voluntary remediation of sites where historical releases of hazardous substances are identified and property owners or responsible parties decide to initiate cleanups.
From time to time, DESC may be identified as a non-hazardous waste under Subtitle Dpotentially responsible party in connection with the alleged release of the Resource Conservationhazardous substances or wastes at a site. Under applicable federal and Recovery Act and imposes certain requirements on ash storage ponds and other CCR management facilities at SCE&G's and GENCO's coal-fired generating facilities. SCE&G and GENCO have already closed or have begun the process of closure of all of their ash storage ponds and have previously recognized AROsstate laws, DESC could be responsible for such ash storage ponds under existing requirements. The Company and Consolidated SCE&G do not expect the incremental compliance costs associated with this rulethe investigation or remediation of impacted sites, or subject to contribution claims by other responsible parties for their costs incurred at such sites. DESC also may identify, evaluate and remediate other potentially impacted sites under voluntary state programs. Remediation costs may be significant and expectsubject to recover such costs in future rates.
DESC has 4 decommissioned MGP sites in South Carolina which contain residues of by-product chemicals. These sitesthat are in various stagesstates of investigation, remediation and monitoring under work plans approved by, DHEC andor under review by, the SCDHEC or the EPA. SCE&GDESC anticipates that major remediation activities at all these sites will continue through 2025 at least throughan estimated cost of $9 million. In addition, for one site, an updated work plan submitted to SCDHEC in September 2018, would increase costs by approximately $11 million if approved by federal and will cost an additional $9.9 million, which is accrued in Other within Deferred Credits and Other Liabilities onstate agencies. In September 2020, this plan was submitted to the condensed consolidated balance sheet. SCE&GArmy Corps of Engineers. DESC expects to recover any costcosts arising from the remediation of MGPwork at all four sites through rates. Atrate recovery mechanisms and as of September 30, 2017,2021, deferred amounts, net of amounts previously recovered through rates and insurance settlements, totaled $24.7$21 million and are included in regulatory assets.
Ash Pond and Landfill Closure Costs
In April 2015, the EPA enacted a final rule regulating CCR landfills, existing ash ponds that still receive and manage CCRs, and inactive ash ponds that do not receive, but still store, CCRs. DESC currently has inactive and existing CCR ponds and CCR landfills subject to the final rule at 3 different facilities. This rule created a legal obligation for DESC to retrofit or close all of its inactive and existing ash ponds over a certain period of time, as well as perform required monitoring, corrective action, and post-closure care activities as necessary.
In December 2016, legislation was enacted that creates a framework for EPA- approved state CCR permit programs. In August 2017, the EPA issued interim guidance outlining the framework for state CCR program approval. The EPA has enforcement authority until state programs are approved. The EPA and states with approved programs both will have authority to enforce CCR requirements under their respective rules and programs. In September 2017, the EPA agreed to reconsider portions of the CCR rule in response to two petitions for reconsideration. In March 2018, the EPA proposed certain changes to the CCR rule related to issues remanded as part of the pending litigation and other issues the EPA is reconsidering. Several of the proposed changes would allow states with approved CCR permit programs additional flexibility in implementing their programs. In July 2018, the EPA promulgated the first phase of changes to the CCR rule. In August 2018, the U.S. Court of Appeals for the D.C. Circuit issued its decision in the pending challenges of the CCR rule, vacating and remanding to the EPA three provisions of the rule. Until this matter is resolved and all phases of the CCR rule are promulgated, DESC is unable to precisely estimate potential incremental impacts or costs related to existing coal ash sites in connection with future implementation of the final CCR rule. While such amounts may be material to DESC’s results of operations, financial condition and/or cash flows, the existing regulatory framework in South Carolina provides rate recovery mechanisms that could substantially mitigate any such impacts.
Abandoned NND Project
A description of events and circumstances leading up to DESC's abandonment of the NND Project and subsequent regulatory, legislative, legal and investigative proceedings, as well as related impairments of NND Project and other costs are described in Note 12 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, 2020.
Claims and Litigation
The following describes certain legal proceedings involving DESC relating to events occurring before closing of the SCANA Combination. No reference to, or disclosure of, any proceeding, item or matter described below shall be construed as an admission or indication that such proceeding, item or matter is material. For certain of these matters, and unless otherwise noted therein, DESC is unable to estimate a reasonable range of possible loss and the related financial statement impacts, but for any such matter there could be a material impact to its results of operations, financial condition and/or cash flows. For the matters for which DESC is able to reasonably estimate, the Consolidated Balance Sheets at September 30, 2021 and December 31, 2020 include reserves of $133 million and $208 million, respectively, and insurance receivables of $8 million, included within other receivables. During the nine months ended September 30, 2021, DESC’s Consolidated Statements of Comprehensive Income include charges of $70 million ($53 million after-tax), included within impairment of assets and other charges. During both the three and nine months ended September 30, 2020, DESC’s Consolidated Statements of Comprehensive Income includes charges of $51 million ($38 million after-tax), included within impairment of assets and other charges.
Ratepayer Class Actions
In May 2018, a consolidated complaint against DESC, SCANA and the State of South Carolina was filed in the State Court of Common Pleas in Hampton County, South Carolina (the DESC Ratepayer Case). The plaintiffs alleged, among other things, that DESC was negligent and unjustly enriched, breached alleged fiduciary and contractual duties and committed fraud and misrepresentation in failing to properly manage the NND Project, and that DESC committed unfair trade practices and violated state anti-trust laws. In December 2018, the State Court of Common Pleas in Hampton County entered an order granting preliminary approval of a class action settlement. The court entered an order granting final approval of the settlement in June 2019, which became effective in July 2019. The settlement agreement, contingent upon the closing of the SCANA Combination, provided that SCANA and DESC establish an escrow account and proceeds from the escrow account would be distributed to the plaintiffs, after payment of certain taxes, attorneys' fees and other expenses and administrative costs. The escrow account would include (1) up to $2.0 billion, net of a credit of up to $2.0 billion in future electric bill relief, which would inure to the benefit of the escrow account in favor of class members over a period of time established by the South Carolina Commission in its order related to matters before the South Carolina Commission related to the NND Project, (2) a cash payment of $115 million and (3) the transfer of certain DESC-owned real estate or sales proceeds from the sale of such properties, which counsel for the plaintiffs estimated to have an aggregate value between $60 million and $85 million. At the closing of the SCANA Combination, SCANA and DESC funded the cash payment portion of the escrow account. In July 2019, DESC transferred $117 million representing the cash payment, plus accrued interest, to the plaintiffs. Through August 2020, property, plant and equipment with a net recorded value of $22 million had been transferred to the plaintiffs in coordination with the court-appointed real estate trustee to satisfy the settlement agreement. In September 2020, the court entered an order approving a final resolution of the transfer of real estate or sales proceeds with a cash contribution of $38.5 million by DESC and the conveyance of property, plant and equipment with a net recorded value of $3 million, which was completed by DESC in October 2020.
In September 2017, a purported class action was filed by Santee Cooper ratepayers against Santee Cooper, DESC, Palmetto Electric Cooperative, Inc. and Central Electric Power Cooperative, Inc. in the State Court of Common Pleas in Hampton County, South Carolina (the Santee Cooper Ratepayer Case). The allegations were substantially similar to those in the DESC Ratepayer Case. In March 2020, the parties executed a settlement agreement relating to this matter as well as the Luquire Case and the Glibowski Case described below. The settlement agreement provided that Dominion Energy and Santee Cooper establish a fund for the benefit of class members in the amount of $520 million, of which Dominion Energy’s portion was $320 million of shares of Dominion Energy common stock. In July 2020, the court issued a final approval of the settlement agreement. In September 2020, Dominion Energy
In July 2019, a similar purported class action was filed by certain Santee Cooper ratepayers against DESC, SCANA, Dominion Energy and former directors and officers of SCANA in the State Court of Common Pleas in Orangeburg, South Carolina (the Luquire Case). In August 2019, DESC, SCANA and Dominion Energy were voluntarily dismissed from the case. The claims were similar to the Santee Cooper Ratepayer Case. In March 2020, the parties executed a settlement agreement as described above relating to this matter as well as the Santee Cooper Ratepayer Case and the Glibowski Case. This case was dismissed as part of the Santee Cooper Ratepayer Case settlement described above.
RICO Class Action
In January 2018, a purported class action was filed, and subsequently amended, against SCANA, DESC and certain former executive officers in the U.S. District Court for the District of South Carolina (the Glibowski Case). The plaintiff alleged, among other things, that SCANA, DESC and the individual defendants participated in an unlawful racketeering enterprise in violation of RICO and conspired to violate RICO by fraudulently inflating utility bills to generate unlawful proceeds. In March 2020, the parties executed a settlement agreement as described above relating to this matter as well as the Santee Cooper Ratepayer Case and the Luquire Case. This case was dismissed as part of the Santee Cooper Ratepayer Case settlement described above.
SCANA Shareholder Litigation
In February 2018, a purported class action was filed against Dominion Energy and certain former directors of SCANA and DESC in the State Court of Common Pleas in Richland County, South Carolina (the Metzler Lawsuit). The plaintiff alleges, among other things, that defendants violated their fiduciary duties to shareholders by executing a merger agreement that would unfairly deprive plaintiffs of the true value of their SCANA stock, and that Dominion Energy aided and abetted these actions. Among other remedies, the plaintiff seeks to enjoin and/or rescind the merger. In February 2018, Dominion Energy removed the case to the U.S. District Court for the District of South Carolina and filed a Motion to Dismiss in March 2018. In September 2019, the U.S. District Court for the District of South Carolina granted the plaintiffs’ motion to consolidate the Metzler Lawsuit with another lawsuit regarding the SCANA Merger Agreement to which DESC is not allocateda party. In October 2019, the plaintiffs filed an amended complaint against certain former directors and executive officers of SCANA and DESC, which stated substantially similar allegations to those in the initial lawsuits as well as an inseparable fraud claim. In November 2019, the defendants filed a motion to dismiss. In April 2020, the U.S. District Court for the District of South Carolina denied the motion to dismiss. In May 2020, SCANA filed a motion to intervene, which was denied in August 2020. In September 2020, SCANA filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit. In June 2021, the parties reached an agreement in principle to settle this case, along with a related case to which DESC was not a party, subject to court approval, with no financial impact to DESC.
Employment Class Actions and Indemnification
In August 2017, a case was filed in the U.S. District Court for the District of South Carolina on behalf of persons who were formerly employed at the NND Project. In July 2018, the court certified this case as a class action. In February 2019, certain of these plaintiffs filed an additional case, which case has been dismissed and the plaintiffs have joined the case filed August 2017. The plaintiffs allege, among other things, that SCANA, DESC, Fluor Corporation and Fluor Enterprises, Inc. violated the Worker Adjustment and Retraining Notification Act in connection with the decision to stop construction at the NND Project. The plaintiffs allege that the defendants failed to provide adequate advance written notice of their terminations of employment and are seeking damages, which could be as much as $100 million for 100% of the NND Project. In January 2021, the U.S. District Court for the District of South Carolina granted summary judgment in favor of SCANA, DESC, Fluor Corporation and Fluor Enterprises, Inc. In February 2021, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit. This case is pending.
In September 2018, a case was filed in the State Court of Common Pleas in Fairfield County, South Carolina by Fluor Enterprises, Inc. and Fluor Daniel Maintenance Services, Inc. against DESC and Santee Cooper. The plaintiffs make claims for indemnification, breach of contract and promissory estoppel arising from, among other things, the defendants' alleged failure and refusal to defend and indemnify the Fluor defendants in the aforementioned case. This case is pending.
FILOT Litigation and Related Matters
In November 2017, Fairfield County filed a complaint and a motion for temporary injunction against DESC in the State Court of Common Pleas in Fairfield County, South Carolina, making allegations of breach of contract, fraud, negligent misrepresentation, breach of fiduciary duty, breach of implied duty of good faith and fair dealing and unfair trade practices related to DESC’s termination of the FILOT agreement between DESC and Fairfield County related to the Electric OperationsNND Project. The plaintiff sought a temporary and Gas Distribution segments.permanent injunction to prevent DESC from terminating the FILOT agreement. The Gas Marketing segment measures profitability using net income.
Fairfield County, South Carolina approved the settlement. In July 2021, Dominion Energy issued 1.4 million shares of Dominion Energy common stock to satisfy DESC’s obligation under the settlement agreement.
Governmental Proceedings and Investigations
In June 2018, DESC received a notice of proposed assessment of approximately $410 million, excluding interest, from the SCDOR following its audit of DESC’s sales and use tax returns for the periods September 1, 2008 through December 31, 2017. The Company's Gas Distribution segment is comprisedproposed assessment, which includes 100% of the local distribution operationsNND Project, is based on the SCDOR’s position that DESC’s sales and use tax exemption for the NND Project does not apply because the facility will not become operational. In December 2020, the parties reached an agreement in principle in the amount of SCE&G$165 million to resolve this matter. In June 2021, the parties executed a settlement agreement which allows DESC to fund the settlement amount through a combination of cash, shares of Dominion Energy common stock or real estate with an initial payment of at least $43 million in shares of Dominion Energy common stock. In August 2021, Dominion Energy issued 0.6 million shares of its common stock to satisfy DESC’s obligation for the initial payment under the settlement agreement.
In September and PSNCOctober 2017, SCANA was served with subpoenas issued by the U.S. Attorney’s Office for the District of South Carolina and the Staff of the SEC’s Division of Enforcement seeking documents related to the NND Project. In February 2020, the SEC filed a complaint against SCANA, two of its former executive officers and DESC in the U.S. District Court for the District of South Carolina alleging that the defendants violated federal securities laws by making false and misleading statements about the NND Project. In April 2020, SCANA and DESC reached an agreement in principle with the Staff of the SEC’s Division of Enforcement to settle, without admitting or denying the allegations in the complaint. In December 2020, the U.S. District Court for the District of South Carolina issued an order approving the settlement which required SCANA to pay a civil monetary penalty totaling $25 million, and SCANA and DESC to pay disgorgement and prejudgment interest totaling $112.5 million, which disgorgement and prejudgment interest amount were deemed satisfied by the settlements in the SCANA Securities Class Action and the DESC Ratepayer Case. SCANA paid the civil penalty in December 2020. The SEC civil action against two former executive officers of SCANA remains pending and is currently subject to a stay granted by the court in June 2020 at the request of the U.S. Attorney’s Office for the District of South Carolina.
In addition, the South Carolina Law Enforcement Division is conducting a criminal investigation into the handling of the NND Project by SCANA and DESC. Dominion Energy is cooperating fully with the investigations by the U.S. Attorney’s Office and the South Carolina Law Enforcement Division, including responding to additional subpoenas and document requests. Dominion Energy has also entered into a cooperation agreement with the U.S. Attorney’s Office and the South Carolina Attorney General’s Office. The cooperation agreement provides that in consideration of its full cooperation with these investigations to the satisfaction of both agencies, neither such agency will criminally prosecute or bring any civil action against Dominion Energy or any of its current, previous, or future direct or indirect subsidiaries related to the NND Project. A former executive officer of SCANA entered a plea agreement with the U.S. Attorney’s Office and the South Carolina Attorney General’s Office in June 2020 and entered a guilty plea with the U.S. District Court for the District of South Carolina in July 2020. Another former executive officer of SCANA entered a plea agreement with the U.S. Attorney's Office and the South Carolina Attorney General's Office in November 2020 and entered guilty pleas in the U.S. District Court for the District of South Carolina and in South Carolina state court in February 2021. As a result of the pleas, Dominion Energy has terminated indemnity for these former executive officers related to these two cases.
Other Litigation
In September 2019, a South Carolina state court jury awarded a judgment to the estate of Jose Larios in a wrongful death suit filed in June 2017 against DESC, of which meetDESC was apportioned $19 million. DESC holds general liability insurance coverage which is expected to provide payment for substantially all DESC’s liability in this matter. In October 2019, DESC filed a motion requesting a reduction in the criteriajudgment or, in the alternative, a new trial. In November 2019,DESC’s motion for aggregation. All Other includesa new trial was granted, setting aside the parent company, a services companyentire verdict amount. This matter is pending.
Contractor Bankruptcy Proceedings
Westinghouse’s Reorganization Plan became effective August 1, 2018. Initially, Westinghouse had projected that its Reorganization Plan would pay in full or nearly in full its pre-petition trade creditors, including several of the Westinghouse Subcontractors which have alleged non-payment by the Consortium for amounts owed for work performed on the NND Project and other nonreportable segmentshave filed liens on related property in Fairfield County, South Carolina. DESC is contesting approximately $285 million of such filed liens. Most of these asserted liens are “pre-petition” claims that were insignificantrelate to work performed by Westinghouse Subcontractors before the Westinghouse bankruptcy, although some of them are “post-petition” claims arising from work performed after the Westinghouse bankruptcy. It is possible that the Reorganization Plan will not provide for all periods presented.
DESC and Santee Cooper were responsible for amounts owed to Westinghouse for valid work performed by Westinghouse Subcontractors on the NND Project after the Westinghouse bankruptcy filing (i.e., post-petition) until termination of the IAA (the IAA Period). In the Westinghouse bankruptcy proceeding, deadlines were established for creditors of Westinghouse to assert the amounts owed to such creditors prior to the Westinghouse bankruptcy filing and during the IAA Period. Many of the Westinghouse Subcontractors have filed such claims. In December 2019, DESC and Santee Cooper entered into a confidential settlement agreement with W Wind Down Co LLC resolving claims relating to the IAA.
Further, some Westinghouse Subcontractors who have made claims against Westinghouse in the bankruptcy proceeding also filed against DESC and Santee Cooper in South Carolina state court for damages. The Westinghouse Subcontractor claims in South Carolina state court include common law claims for pre-petition work, IAA Period work, and work after the termination of the IAA. Many of these claimants have also asserted construction liens against the NND Project site. While DESC cannot be assured that it will not have any exposure on account of unpaid Westinghouse Subcontractor claims, which claims DESC is presently disputing, DESC believes it is unlikely that it will be required to make payments on account of such claims that would exceed the portion of the Toshiba Settlement allocated for such balances within the SCANA Merger Approval Order recorded in regulatory liabilities on DESC’s Consolidated Balance Sheets.
Nuclear Insurance
Other than the item discussed below, there have been no significant changes regarding DESC’s nuclear insurance as described in Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2020.
In March 2021, the total liability protection per nuclear incident available to all participants in the Secondary Financial Protection Program decreased from $13.8 billion to $13.7 billion. In June 2021, the total liability protection per nuclear incident available to all participants in the Secondary Financial Protection Program decreased from $13.7 billion to $13.5 billion. These decreases do not impact DESC’s responsibility per active unit under the Price-Anderson Amendments Act of 1988.
11. OPERATING SEGMENTS
The Corporate and Other segment includes specific items attributable to its operating segment that are not included in profit measures evaluated by executive management in assessing the segment’s performance or in allocating resources.
In the nine months ended September 30, 2021, DESC reported after-tax net expense of $261 million for specific items in the Corporate and Other segment, all of which was attributable to its operating segment. In the nine months ended September 30, 2020, DESC reported after-tax net expense of $61 million for specific items in the Corporate and Other segment, all of which was attributable to its operating segment.
The net expense for specific items attributable to DESC’s operating segment in 2021 primarily related to the impact of the following items:
• | $266 million ($199 million after-tax) of charges associated with the settlement of the South Carolina electric base rate case; and |
The Company | ||||||||||||||||
Millions of dollars | External Revenue | Intersegment Revenue | Operating Income | Net Income | ||||||||||||
Three Months Ended September 30, 2017 | ||||||||||||||||
Electric Operations | $ | 786 | $ | 1 | $ | 126 | n/a | |||||||||
Gas Distribution | 123 | — | (7 | ) | n/a | |||||||||||
Gas Marketing | 167 | 35 | n/a | $ | 1 | |||||||||||
All Other | — | 90 | — | (7 | ) | |||||||||||
Adjustments/Eliminations | — | (126 | ) | 1 | 40 | |||||||||||
Consolidated Total | $ | 1,076 | $ | — | $ | 120 | $ | 34 |
• | A $70 million ($53 million after-tax) charge associated with litigation. |
Nine Months Ended September 30, 2017 | ||||||||||||||||
Electric Operations | $ | 2,042 | $ | 4 | $ | 549 | n/a | |||||||||
Gas Distribution | 584 | 1 | 109 | n/a | ||||||||||||
Gas Marketing | 623 | 93 | n/a | $ | 17 | |||||||||||
All Other | — | 286 | — | (14 | ) | |||||||||||
Adjustments/Eliminations | — | (384 | ) | 27 | 323 | |||||||||||
Consolidated Total | $ | 3,249 | $ | — | $ | 685 | $ | 326 |
Three Months Ended September 30, 2016 | ||||||||||||||||
Electric Operations | $ | 817 | $ | 1 | $ | 364 | n/a | |||||||||
Gas Distribution | 111 | — | (14 | ) | n/a | |||||||||||
Gas Marketing | 165 | 35 | n/a | $ | (1 | ) | ||||||||||
All Other | — | 100 | — | (7 | ) | |||||||||||
Adjustments/Eliminations | — | (136 | ) | (2 | ) | 197 | ||||||||||
Consolidated Total | $ | 1,093 | $ | — | $ | 348 | $ | 189 |
Nine Months Ended September 30, 2016 | ||||||||||||||||
Electric Operations | $ | 2,035 | $ | 4 | $ | 784 | n/a | |||||||||
Gas Distribution | 538 | 1 | 79 | n/a | ||||||||||||
Gas Marketing | 598 | 83 | n/a | $ | 23 | |||||||||||
All Other | — | 302 | — | (14 | ) | |||||||||||
Adjustments/Eliminations | — | (390 | ) | 37 | 462 | |||||||||||
Consolidated Total | $ | 3,171 | $ | — | $ | 900 | $ | 471 |
The net expense for specific items attributable to DESC’s operating segment in 2020 primarily related to $53 million ($40 million after-tax) of charges associated with litigation.
(millions) |
| External Revenue |
|
| Comprehensive Income (Loss) Available (Attributable) to Common Shareholder |
| ||
Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
Dominion Energy South Carolina |
| $ | 863 |
|
| $ | 149 |
|
Corporate and Other |
|
| 0 |
|
|
| (5 | ) |
Consolidated Total |
| $ | 863 |
|
| $ | 144 |
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
Dominion Energy South Carolina |
| $ | 755 |
|
| $ | 153 |
|
Corporate and Other |
|
| 0 |
|
|
| (52 | ) |
Consolidated Total |
| $ | 755 |
|
| $ | 101 |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
Dominion Energy South Carolina |
| $ | 2,299 |
|
| $ | 325 |
|
Corporate and Other |
|
| 0 |
|
|
| (261 | ) |
Consolidated Total |
| $ | 2,299 |
|
| $ | 64 |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
Dominion Energy South Carolina |
| $ | 2,051 |
|
| $ | 319 |
|
Corporate and Other |
|
| 0 |
|
|
| (61 | ) |
Consolidated Total |
| $ | 2,051 |
|
| $ | 258 |
|
Consolidated SCE&G | ||||||||||||
Millions of dollars | External Revenue | Operating Income | Earnings Available to Common Shareholder | |||||||||
Three Months Ended September 30, 2017 | ||||||||||||
Electric Operations | $ | 787 | $ | 125 | n/a | |||||||
Gas Distribution | 69 | (2 | ) | n/a | ||||||||
Adjustments/Eliminations | — | — | $ | 39 | ||||||||
Consolidated Total | $ | 856 | $ | 123 | $ | 39 |
Nine Months Ended September 30, 2017 | ||||||||||||
Electric Operations | $ | 2,046 | $ | 549 | n/a | |||||||
Gas Distribution | 285 | 42 | n/a | |||||||||
Adjustments/Eliminations | — | — | $ | 270 | ||||||||
Consolidated Total | $ | 2,331 | $ | 591 | $ | 270 |
Three Months Ended September 30, 2016 | ||||||||||||
Electric Operations | $ | 818 | $ | 364 | n/a | |||||||
Gas Distribution | 64 | (5 | ) | n/a | ||||||||
Adjustments/Eliminations | — | — | $ | 201 | ||||||||
Consolidated Total | $ | 882 | $ | 359 | $ | 201 |
Nine Months Ended September 30, 2016 | ||||||||||||
Electric Operations | $ | 2,039 | $ | 784 | n/a | |||||||
Gas Distribution | 253 | 32 | n/a | |||||||||
Adjustments/Eliminations | — | — | $ | 423 | ||||||||
Consolidated Total | $ | 2,292 | $ | 816 | $ | 423 |
Segment Assets | The Company | Consolidated SCE&G | ||||||||||||||
September 30, | December 31, | September 30, | December 31, | |||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Electric Operations | $ | 12,294 | $ | 11,929 | $ | 12,294 | $ | 11,929 | ||||||||
Gas Distribution | 3,080 | 2,892 | 856 | 825 | ||||||||||||
Gas Marketing | 187 | 230 | n/a | n/a | ||||||||||||
All Other | 970 | 1,124 | n/a | n/a | ||||||||||||
Adjustments/Eliminations | 3,488 | 2,532 | 4,283 | 3,337 | ||||||||||||
Consolidated Total | $ | 20,019 | $ | 18,707 | $ | 17,433 | $ | 16,091 |
12. AFFILIATED AND RELATED PARTY TRANSACTIONS
DESC owns 40% of Canadys Refined Coal, LLC, which iswas involved in the manufacturing and sale of refined coal to reduce emissions. SCE&Gemissions at one of DESC's generating facilities. DESC accounts for this investment using the equity method. The net of the total purchases and total sales are recorded in Other expenses on the consolidated statements of income (for the Company) and of comprehensive income (for Consolidated SCE&G).
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Millions of Dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Purchases from Canadys Refined Coal, LLC | $ | 47.5 | $ | 41.8 | $ | 144.9 | $ | 138.6 | ||||||||
Sales to Canadys Refined Coal, LLC | 47.2 | 41.6 | 144.0 | 137.8 |
Millions of Dollars | September 30, 2017 | December 31, 2016 | ||||||
Receivable from Canadys Refined Coal, LLC | $ | 7.6 | $ | 16.0 | ||||
Payable to Canadys Refined Coal, LLC | 7.7 | 16.1 |
DESS, on behalf of itself and its parent company, providesprovided the following services to Consolidated SCE&G,DESC through December 2020, which arewere rendered at direct or allocated cost: information systems, telecommunications, customer support, marketing and sales, human resources, corporate compliance, purchasing, financial, risk management, public affairs, legal, investor relations, gas supply and capacity management, strategic planning, general administrative and retirement benefits. In addition, SCANA Services processesDESS processed and payspaid invoices for Consolidated SCE&GDESC and iswas reimbursed. Effective January 2021, DES provides to DESC the services previously provided by DESS. Costs for these services include amounts capitalized. Amounts expensed are primarily recorded in Other operationother operations and maintenance - nonconsolidated affiliateaffiliated suppliers and Other expenses onother income (expense), net in the consolidated statementsConsolidated Statements of comprehensive income.Comprehensive Income.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Direct and allocated costs from DES and DESS(1) |
| $ | 53 |
|
| $ | 72 |
|
| $ | 168 |
|
| $ | 202 |
|
Operating Revenues - Electric from sales to affiliate |
|
| 0 |
|
|
| 1 |
|
|
| 2 |
|
|
| 3 |
|
Operating Expenses - Other taxes from affiliate |
|
| 2 |
|
|
| 3 |
|
|
| 6 |
|
|
| 7 |
|
Purchases of electricity from solar affiliates |
|
| 5 |
|
|
| 4 |
|
|
| 12 |
|
|
| 10 |
|
Demand and transportation charges from DECG - Fuel used in electric generation |
|
| 0 |
|
|
| 5 |
|
|
| 0 |
|
|
| 14 |
|
Demand and transportation charges from DECG - Gas purchased for resale |
|
| 0 |
|
|
| 11 |
|
|
| 0 |
|
|
| 33 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Millions of Dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Purchases from SCANA Energy | $ | 35.3 | $ | 34.8 | $ | 93.4 | $ | 83.1 | ||||||||
Direct and Allocated Costs from SCANA Services | 78.1 | 80.4 | 233.6 | 236.4 |
Millions of Dollars | September 30, 2017 | December 31, 2016 | ||||||
Payable to SCANA Energy | $ | 10.7 | $ | 8.8 | ||||
Payable to SCANA Services | 45.3 | 63.5 |
(1) | Includes capitalized expenditures of $8 million and $23 million for the three months ended September 30, 2021 and 2020, respectively, and $23 million and $48 million for the nine months ended September 30, 2021 and 2020, respectively. |
(millions) |
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Payable to DES and DESS |
| $ | 20 |
|
| $ | 59 |
|
Payable to Public Service Company of North Carolina, Incorporated |
|
| — |
|
|
| 5 |
|
Receivable from Public Service Company of North Carolina, Incorporated |
|
| 29 |
|
|
| — |
|
Payable to solar affiliates |
|
| 1 |
|
|
| 1 |
|
Receivable from nuclear affiliates |
|
| 1 |
|
|
| — |
|
Payable to DEI |
|
| 2 |
|
|
| — |
|
Derivative assets with affiliates(1) |
|
| 9 |
|
|
| 0 |
|
(1) | Effective in the second quarter of 2021, contracts for the future purchase of certain quantities of electricity from solar affiliates no longer met the criteria for the normal purchase normal sale exception and are accounted for as derivative contracts. |
Borrowings from an affiliate are described in condensed consolidated Note 4. SCE&G's participation5.
13. OTHER INCOME (EXPENSE), NET
Components of other income (expense), net are as follows:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Revenues from contracts with customers |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 1 |
|
Other income |
|
| 3 |
|
|
| 3 |
|
|
| 10 |
|
|
| 10 |
|
Other expense |
|
| 1 |
|
|
| (6 | ) |
|
| (15 | ) |
|
| (11 | ) |
Allowance for equity funds used during construction |
|
| 2 |
|
|
| 1 |
|
|
| 5 |
|
|
| 3 |
|
Other income (expense), net |
| $ | 6 |
|
| $ | (2 | ) |
| $ | 0 |
|
| $ | 3 |
|
Non-service cost components of pension and other postretirement benefits are included in SCANA's noncontributory defined benefit pension plan and unfunded postretirement health care and life insurance programs is described in condensed consolidated Note 8.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
MD&A provides management’s narrative analysis of its consolidated results of operation and other information described therein. Such information is presented hereunder specifically for Consolidated SCE&G, but may be presented alongside information presented for the Company generally. Consolidated SCE&G makes no representation as to information relating solely to SCANA and its subsidiaries (other than Consolidated SCE&G).
Forward-Looking Statements
This report contains statements concerning DESC’s expectations, plans, objectives, future financial performance and Results of Operations appearingother statements that are not historical facts. These statements are “forward-looking statements.” In most cases, the reader can identify these forward-looking statements by such words as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “plan,” “may,” “continue,” “target” or other similar words.
DESC makes forward-looking statements with full knowledge that risks and uncertainties exist that may cause actual results to differ materially from predicted results. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Additionally, other factors may cause actual results to differ materially from those indicated in SCANA’s and SCE&G’sany forward-looking statement. These factors include but are not limited to:
• | Unusual weather conditions and their effect on energy sales to customers and energy commodity prices; |
• | Extreme weather events and other natural disasters, including, but not limited to, hurricanes, high winds, severe storms, earthquakes, flooding, climate changes and changes in water temperatures and availability that can cause outages and property damage to facilities; |
• | The impact of extraordinary external events, such as the current pandemic health event resulting from COVID-19, and their collateral consequences, including extended disruption of economic activity in our markets and global supply chains; |
• | Federal, state and local legislative and regulatory developments, including changes in federal and state tax laws and regulations; |
• | Risks of operating businesses in regulated industries that are subject to changing regulatory structures; |
• | Changes to regulated rates collected; |
• | Changes in future levels of domestic and international natural gas production, supply or consumption; |
• | Timing and receipt of regulatory approvals necessary for planned construction or growth projects and compliance with conditions associated with such regulatory approvals; |
• | The inability to complete planned construction, conversion or growth projects at all, or with the outcomes or within the terms and time frames initially anticipated, including as a result of increased public involvement, intervention or litigation in such projects; |
• | Changes to federal, state and local environmental laws and regulations, including those related to climate change, the tightening of emission or discharge limits for GHGs and other substances, more extensive permitting requirements and the regulation of additional substances; |
• | Cost of environmental compliance, including those costs related to climate change; |
• | Changes in implementation and enforcement practices of regulators relating to environmental standards and litigation exposure for remedial activities; |
• | Difficulty in anticipating mitigation requirements associated with environmental and other regulatory approvals or related appeals; |
• | The impact of operational hazards, including adverse developments with respect to pipeline and plant safety or integrity, equipment loss, malfunction or failure, operator error and other catastrophic events; |
• | Risks associated with the operation of nuclear facilities, including costs associated with the disposal of spent nuclear fuel, decommissioning, plant maintenance and changes in existing regulations governing such facilities; |
• | Changes in operating, maintenance and construction costs; |
• | Domestic terrorism and other threats to DESC’s physical and intangible assets, as well as threats to cybersecurity; |
• | Additional competition from the development and deployment of alternative energy sources, such as self-generation and distributed generation technologies; |
• | Competition in the development, construction and ownership of certain electric transmission facilities in connection with Order 1000; |
• | Changes in technology, particularly with respect to new, developing or alternative sources of generation and smart grid technologies; |
• | Changes in demand for services, including industrial, commercial and residential growth or decline in service areas, changes in supplies of natural gas delivered, changes in customer growth or usage patterns, including as a result of energy conservation programs, the availability of energy efficient devices and the use of distributed generation methods; |
• | Adverse outcomes in litigation matters or regulatory proceedings, including matters related to the NND Project; |
• | Counterparty credit and performance risk; |
• | Fluctuations in the value of investments held in nuclear decommissioning and benefit plan trusts; |
• | Fluctuations in energy-related commodity prices and the effect these could have on DESC’s financial position and the underlying value of assets; |
• | Fluctuations in interest rates; |
• | Changes in rating agency requirements or credit ratings and their effect on availability and cost of capital; |
• | Global capital market conditions, including the availability of credit and the ability to obtain financing on reasonable terms; |
• | Political and economic conditions, including inflation and deflation; |
• | Employee workforce factors including collective bargaining agreements and labor negotiations with union employees; and |
• | Changes in financial or regulatory accounting principles or policies imposed by governing bodies. |
Additionally, other risks that could cause actual results to differ from predicted results are set forth in Part I. Item 1A. Risk Factors in DESC’s Annual Report on Form 10-K for the year ended December 31, 2016. The2020.
DESC’s forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. DESC cautions the reader not to place undue reliance on its forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. DESC undertakes no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.
Results of Operations
Presented below is a summary of DESC’s consolidated results:
|
| Third Quarter |
|
| Year-To-Date |
| ||||||||||||||||||
(millions) |
| 2021 |
|
| 2020 |
|
| $ Change |
|
| 2021 |
|
| 2020 |
|
| $ Change |
| ||||||
Net income |
| $ | 148 |
|
| $ | 106 |
|
| $ | 42 |
|
| $ | 77 |
|
| $ | 266 |
|
| $ | (189 | ) |
Overview
Third Quarter 2021 vs. 2020
Net income increased 40%, primarily due to the absence of charges associated with litigation.
Year-To-Date 2021 vs. 2020
Net income decreased 71%, primarily due to charges associated with the settlement of the South Carolina electric base rate case.
Analysis of Consolidated Operations
Presented below are selected amounts related to DESC’s results of operations:
|
| Third Quarter |
|
| Year-To-Date |
| ||||||||||||||||||
(millions) |
| 2021 |
|
| 2020 |
|
| $ Change |
|
| 2021 |
|
| 2020 |
|
| $ Change |
| ||||||
Operating revenues |
| $ | 863 |
|
| $ | 755 |
|
| $ | 108 |
|
| $ | 2,299 |
|
| $ | 2,051 |
|
| $ | 248 |
|
Fuel used in electric generation |
|
| 200 |
|
|
| 135 |
|
|
| 65 |
|
|
| 452 |
|
|
| 334 |
|
|
| 118 |
|
Purchased power |
|
| 24 |
|
|
| 25 |
|
|
| (1 | ) |
|
| 67 |
|
|
| 63 |
|
|
| 4 |
|
Gas purchased for resale |
|
| 57 |
|
|
| 33 |
|
|
| 24 |
|
|
| 188 |
|
|
| 124 |
|
|
| 64 |
|
Other operations and maintenance |
|
| 161 |
|
|
| 142 |
|
|
| 19 |
|
|
| 477 |
|
|
| 430 |
|
|
| 47 |
|
Impairment of assets and other charges |
|
| 1 |
|
|
| 63 |
|
|
| (62 | ) |
|
| 320 |
|
|
| 65 |
|
|
| 255 |
|
Depreciation and amortization |
|
| 122 |
|
|
| 118 |
|
|
| 4 |
|
|
| 362 |
|
|
| 354 |
|
|
| 8 |
|
Other taxes |
|
| 64 |
|
|
| 59 |
|
|
| 5 |
|
|
| 191 |
|
|
| 186 |
|
|
| 5 |
|
Other income (expense), net |
|
| 6 |
|
|
| (2 | ) |
|
| 8 |
|
|
| — |
|
|
| 3 |
|
|
| (3 | ) |
Interest charges |
|
| 50 |
|
|
| 57 |
|
|
| (7 | ) |
|
| 159 |
|
|
| 173 |
|
|
| (14 | ) |
Income tax expense |
|
| 42 |
|
|
| 15 |
|
|
| 27 |
|
|
| 6 |
|
|
| 59 |
|
|
| (53 | ) |
An analysis of DESC’s results of operations of the Company include those of the parent holding company and each of its subsidiaries, including Consolidated SCE&G. Accordingly, discussions regarding the Company's results of operations necessarily include those of Consolidated SCE&G.
Third Quarter | Year to Date | |||||||||||||||
The Company | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Earnings per share | $ | 0.24 | $ | 1.32 | $ | 2.28 | $ | 3.29 | ||||||||
Consolidated SCE&G | ||||||||||||||||
Net income (millions of dollars) | $ | 41.8 | $ | 204.0 | $ | 279.7 | $ | 432.9 |
Third Quarter
Operating revenue increased 14%, primarily due to a $95 million increase in the fuel cost component included in utility rates as a result of an increase in commodity costs and Consolidated SCE&G's net income reflect lower operating income from Electric Operations, which includes an impairment losspurchased power costs associated with sales to electric utility retail customers ($70 million) and gas utility customers ($25 million), an increase in sales to electric utility retail customers associated with economic and other usage factors ($15 million), an increase in sales to electric utility retail customers associated with growth ($7 million) and the abandonmentabsence of changes in excess deferred income tax amortization included within the New Units,capital cost rider ($7 million), partially offset by improved operating income from Gas Distribution. These and other results are discussed below.
The Company | Consolidated SCE&G | |||||||||||||||||||||||||||||||
Third Quarter | Year to Date | Third Quarter | Year to Date | |||||||||||||||||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Operating revenues | $ | 787.3 | $ | 818.4 | $ | 2,045.9 | $ | 2,038.5 | $ | 787.3 | $ | 818.4 | $ | 2,045.9 | $ | 2,038.5 | ||||||||||||||||
Fuel used in electric generation | 166.5 | 176.4 | 464.1 | 442.9 | 166.5 | 176.4 | 464.1 | 442.9 | ||||||||||||||||||||||||
Purchased power | 22.3 | 21.0 | 54.1 | 49.6 | 22.3 | 21.0 | 54.1 | 49.6 | ||||||||||||||||||||||||
Other operation and maintenance | 133.1 | 130.0 | 382.5 | 389.9 | 136.6 | 133.6 | 393.2 | 400.1 | ||||||||||||||||||||||||
Impairment loss | 210.0 | — | 210.0 | — | 210.0 | — | 210.0 | — | ||||||||||||||||||||||||
Depreciation and amortization | 73.8 | 71.9 | 219.9 | 213.4 | 70.8 | 68.8 | 211.0 | 204.7 | ||||||||||||||||||||||||
Other taxes | 56.4 | 55.4 | 166.8 | 159.0 | 55.9 | 54.9 | 165.0 | 157.5 | ||||||||||||||||||||||||
Operating Income | $ | 125.2 | $ | 363.7 | $ | 548.5 | $ | 783.7 | $ | 125.2 | $ | 363.7 | $ | 548.5 | $ | 783.7 |
Fuel used in electric generation and purchased power expenses decreasedincreased 48%, primarily due to lower sales volumesincreased fuel costs associated with the effects of weather of $10.3 million, residentialelectric utility retail customers, which are offset in operating revenue and commercial average use of $1.3 million and industrial usage of $0.7 million. These decreases were partially offsetdo not impact net income.
Gas purchased for resale increased 73%, primarily due to higher sales volumesan increase in costs associated with residentialgas utility customers, which are offset in operating revenue and commercial customer growth of $1.6 million, higher fuel handling expenses of $1.2 million and higher fuel prices of $1.4 million.
Other operationoperations and maintenance expenses increased 13%, primarily due to higher non-labor electric generation costsan increase in outside services.
Impairment of $2.0 millionassets and other charges decreased 98%, primarily due to the absence of charges associated with litigation ($51 million) and the recognitionabsence of nuclear abandonment-related severance costsan impairment charge of $12.3 million. These increases were partially offset by lower other labor costs of $12.6certain nonutility property ($12 million).
Other income (expense), net increased $8 million, primarily due to lower incentive compensationnon-service costs related to pension and other postretirement benefits.
Interest charges decreased 12%, primarily due to lower pension costsamortization on losses of reacquired debt associated with the lower pension rider collections.
Income tax expense increased primarily due to net plant additions.
Year-To-Date 2021 vs. 2020
Operating revenues revenue increased 12%, primarily due to base rate increases undera $195 million increase in the BLRA of $50.1 million, residential and commercial growth of $23.0 million, industrial growth and usage of $3.6 million, revenue recognized under the DER program of $3.4 million and higher fuel cost recoverycomponent included in utility rates as a result of $45.7 million. These revenue increases were partially offset by the effects of weather of $102.1 millionan increase in commodity costs and lower residentialpurchased power costs associated with sales to electric utility retail customers ($130 million) and commercial average use of $16.4 million.
Fuel used in electric generation and purchased power expenses increased due to higher fuel prices of $45.7 million, higher fuel handling expenses of $1.7 million and increased sales volumes associated with residential and commercial customer growth of $4.4 million. These increases were partially offset due to lower sales volumes associated with the effects of weather of $20.9 million, residential and commercial average use of $3.6 million and lower industrial usage of $2.3 million.
Gas purchased for resale increased 52%, primarily due to an increase in costs associated with gas utility customers, which are offset in operating revenue and do not impact net income.
Other operations and maintenance increased 11%, primarily due to an increase in outside services ($26 million), an increase in salaries, wages and benefits and administrative expenses ($9 million), an increase in materials and supplies ($9 million) and NND Project wind down costs ($5 million), partially offset by higher non-labor electric generation costs of $2.0 million and the recognition of nuclear abandonment-related severance costs of $12.3 million.
Third Quarter | Year to Date | |||||||||||
Classification | 2017 | 2016 | 2017 | 2016 | ||||||||
Residential | 2,384 | 2,648 | 5,936 | 6,450 | ||||||||
Commercial | 2,159 | 2,259 | 5,663 | 5,861 | ||||||||
Industrial | 1,652 | 1,676 | 4,676 | 4,760 | ||||||||
Other | 163 | 171 | 444 | 462 | ||||||||
Total Retail Sales | 6,358 | 6,754 | 16,719 | 17,533 | ||||||||
Wholesale | 257 | 276 | 699 | 725 | ||||||||
Total Sales | 6,615 | 7,030 | 17,418 | 18,258 |
Impairment of the local distribution operations of SCE&G,assets and for the Company, also includes PSNC Energy. Gas Distribution operating income (including transactions with affiliates) was as follows:
The Company | Consolidated SCE&G | |||||||||||||||||||||||||||||||
Third Quarter | Year to Date | Third Quarter | Year to Date | |||||||||||||||||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Operating revenues | $ | 123.4 | $ | 111.9 | $ | 585.7 | $ | 539.3 | $ | 68.3 | $ | 64.0 | $ | 285.1 | $ | 253.2 | ||||||||||||||||
Gas purchased for resale | 57.8 | 51.2 | 254.1 | 238.2 | 38.5 | 36.5 | 146.5 | 126.0 | ||||||||||||||||||||||||
Other operation and maintenance | 39.8 | 42.9 | 126.2 | 129.7 | 16.9 | 18.4 | 52.9 | 54.1 | ||||||||||||||||||||||||
Depreciation and amortization | 21.4 | 20.8 | 63.3 | 60.9 | 7.4 | 6.8 | 21.6 | 20.3 | ||||||||||||||||||||||||
Other taxes | 10.5 | 10.4 | 32.4 | 31.3 | 7.2 | 7.0 | 21.6 | 20.3 | ||||||||||||||||||||||||
Operating Income (Loss) | $ | (6.1 | ) | $ | (13.4 | ) | $ | 109.7 | $ | 79.2 | $ | (1.7 | ) | $ | (4.7 | ) | $ | 42.5 | $ | 32.5 |
Other income (expense), net decreased $3 million, customer growth of $1.8 million and higher average use of $1.2 million. In addition to these factors, operating revenues at the Company increased due to PSNC Energy's gas cost recovery of $3.0 million, a rate increase effective November 2016 of $1.8 million, higher industrial revenue of $1.3 million and customer growth of $1.0 million.
Income tax expense decreased 90%, primarily due to lower labor costs of $3.8 million at PSNC Energy and $1.7 million at SCE&G, primarily due to lower incentive compensation costs. These increases werepre-tax income ($60 million), partially offset by higher non-labor costs at PSNC Energy.
The Company | Consolidated SCE&G | |||||||||||||||||||||||
Third Quarter | Year to Date | Third Quarter | Year to Date | |||||||||||||||||||||
Classification (in thousands) | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Residential | 2,196 | 2,073 | 21,958 | 27,055 | 742 | 696 | 6,690 | 8,473 | ||||||||||||||||
Commercial | 4,537 | 4,363 | 19,113 | 20,748 | 2,381 | 2,295 | 8,783 | 9,361 | ||||||||||||||||
Industrial | 4,644 | 4,493 | 14,723 | 14,380 | 4,289 | 4,141 | 13,289 | 12,762 | ||||||||||||||||
Transportation | 14,865 | 15,171 | 38,313 | 37,089 | 1,516 | 1,252 | 4,602 | 3,747 | ||||||||||||||||
Total | 26,242 | 26,100 | 94,107 | 99,272 | 8,928 | 8,384 | 33,364 | 34,343 |
Third Quarter | Year to Date | |||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating revenues | $ | 202.1 | $ | 199.8 | $ | 716.4 | $ | 681.5 | ||||||||
Net income (Loss) | 0.7 | (1.0 | ) | 16.9 | 22.9 |
The Company | Consolidated SCE&G | |||||||||||||||||||||||||||||||
Third Quarter | Year to Date | Third Quarter | Year to Date | |||||||||||||||||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Other operation and maintenance | $ | 183.1 | $ | 186.6 | $ | 543.1 | $ | 557.9 | $ | 153.5 | $ | 152.0 | $ | 446.1 | $ | 454.2 | ||||||||||||||||
Impairment loss | 210.0 | — | 210.0 | — | 210.0 | — | 210.0 | — | ||||||||||||||||||||||||
Depreciation and amortization | 95.7 | 93.2 | 284.7 | 276.1 | 78.2 | 75.6 | 232.6 | 225.0 | ||||||||||||||||||||||||
Other taxes | 67.2 | 66.3 | 200.2 | 191.8 | 63.1 | 62.0 | 186.6 | 177.8 |
The Company | Consolidated SCE&G | |||||||||||||||||||||||||||||||
Third Quarter | Year to Date | Third Quarter | Year to Date | |||||||||||||||||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Other income | $ | 28.4 | $ | 15.8 | $ | 61.0 | $ | 46.4 | $ | 20.8 | $ | 7.3 | $ | 36.1 | $ | 19.6 | ||||||||||||||||
Other expense | (7.0 | ) | (7.1 | ) | (25.4 | ) | (31.5 | ) | (6.2 | ) | (4.6 | ) | (17.3 | ) | (18.8 | ) | ||||||||||||||||
AFC - equity funds | (0.6 | ) | 6.9 | 17.6 | 21.6 | (3.5 | ) | 6.4 | 12.7 | 18.7 |
Millions of dollars | 2017 | 2018 | 2019 | |||||||||
SCE&G - Gas | $ | 74 | $ | 100 | $ | 106 | ||||||
PSNC Energy | 332 | 244 | 192 | |||||||||
Total | $ | 406 | $ | 344 | $ | 298 |
Expected Maturity | 2017 | 2018 | 2019 | 2020 | ||||||||||
Futures - Long | ||||||||||||||
Settlement Price (a) | 3.10 | 3.15 | 3.07 | — | ||||||||||
Contract Amount (b) | 21.4 | 45.9 | 6.9 | — | ||||||||||
Fair Value (b) | 20.1 | 45.4 | 7.1 | — | ||||||||||
Futures - Short | ||||||||||||||
Settlement Price (a) | 3.09 | 3.16 | — | — | ||||||||||
Contract Amount (b) | 6.7 | 8.0 | — | — | ||||||||||
Fair Value (b) | 6.0 | 7.7 | — | — | ||||||||||
Options - Purchased Call (Long) | ||||||||||||||
Strike Price (a) | — | 2.54 | — | — | ||||||||||
Contract Amount (b) | — | 19.1 | — | — | ||||||||||
Fair Value (b) | — | 1.0 | — | — | ||||||||||
Swaps - Commodity | ||||||||||||||
Pay fixed/receive variable (b) | 6.3 | 20.4 | 5.3 | 1.0 | ||||||||||
Average pay rate (a) | 3.3022 | 3.2285 | 2.9381 | 2.8950 | ||||||||||
Average received rate (a) | 3.1043 | 3.1288 | 2.9703 | 2.8219 | ||||||||||
Fair value (b) | 5.9 | 19.8 | 5.4 | 0.9 | ||||||||||
Pay variable/receive fixed (b) | 6.3 | 25.5 | 8.0 | 0.9 | ||||||||||
Average pay rate (a) | 3.0973 | 3.0822 | 2.9796 | 2.8397 | ||||||||||
Average received rate (a) | 3.1848 | 3.1643 | 2.9499 | 2.9499 | 2.8973 | |||||||||
Fair value (b) | 6.5 | 26.1 | 8.0 | 0.9 | ||||||||||
Swaps - Basis | ||||||||||||||
Pay variable/receive variable (b) | 7.1 | 8.0 | 0.3 | — | ||||||||||
Average pay rate (a) | 3.0073 | 3.2222 | 3.2311 | — | ||||||||||
Average received rate (a) | 2.9666 | 3.1828 | 3.1441 | — | ||||||||||
Fair value (b) | 7.0 | 7.9 | 0.3 | — | ||||||||||
(a) Weighted average, in dollars | ||||||||||||||
(b) Millions of dollars |
ITEM 4. CONTROLS AND PROCEDURES
Senior management of
There were effective. There has been no change in internal control over financial reportingchanges that occurred during the last fiscal quarter ended
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, DESC is party to various legal, proceedings through September 30, 2017. The Company and Consolidated SCE&G intend to vigorously contest the lawsuits which have been filed against them. For developments related to theseenvironmental or other regulatory proceedings, subsequent to September 30, 2017, if any, see Note 2 and Note 9including in the ordinary course of business. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the condensed consolidated financial statements. No referenceproceedings and such proceedings involve potential monetary sanctions that DESC reasonably believes will exceed a specified threshold. Pursuant to or disclosurethe SEC regulations, DESC uses a threshold of any proceeding, item or matter described below shall be construed as an admission or indication that$1 million for such proceeding, item or matter is material or that such proceeding, items or matter is required to be referred to or disclosed in this Form 10-Q.
See the following for discussions on behalf of himself and all others similarly situated, in the State Court of Common Pleas in Richland County, South Carolina (the “Richland County Court”). The plaintiff alleges, among other things, that SCE&G was negligent and unjustly enriched and breached alleged fiduciary and contractual duties by failing to properly manage the V.C. Summer construction project. The plaintiff seeks to recover, on behalf of the purported class, unspecified damages and attorneys’ fees, specific performance of the alleged implied contract to construct the now abandoned project, and any other relief the court deems proper.
• | Notes 3 and 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2020. |
• | Notes 2 and 10 to the Consolidated Financial Statements in this report. |
ITEM 1A. RISK FACTORS
DESC’s business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond its control. A number of these risk factors from the Registrants' combinedhave been identified in DESC’s Annual Report on Form 10-K for the year ended December 31, 2016, and combined Quarterly Report on Form 10-Q for2020, which should be taken into consideration when reviewing the quarter ended June 30, 2017,information contained in this report. There have been updated and are restated below in their entirety.
Issuer Purchases of Equity Securities | ||||||||||||
(a) | (b) | (c) | (d) | |||||||||
Period | Total number of shares (or units) purchased | Average price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs | ||||||||
July 1 - 31 | 5,935 | $ | 65.16 | 5,935 | ||||||||
August 1 - 31 | — | — | — | |||||||||
September 1 - 30 | — | — | — | |||||||||
Total | 5,935 | 5,935 | * |
ITEM 6. EXHIBITS
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
4.1 | Dominion Energy South Carolina, Inc. agrees to furnish to the U.S. Securities and Exchange Commission upon request any instrument with respect to long-term debt as to which the total amount of securities authorized does not exceed 10% of its total consolidated assets. | |
31.a | ||
31.b | ||
32.a | ||
101 | The following financial statements from Dominion Energy South Carolina, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on November 5, 2021, formatted in iXBRL (Inline eXtensible Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Changes in Common Equity, and (v) the Notes to Consolidated Financial Statements. | |
104 | Cover Page Interactive Data File (formatted in iXBRL (Inline eXtensible Reporting Language) and contained in Exhibit 101). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrantsregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of each registrant shall be deemed to relate only to matters having reference to such registrant and any subsidiaries thereof.
DOMINION ENERGY SOUTH CAROLINA, INC. | ||
(Registrant) | ||
By: | /s/ Michele L. Cardiff | |
Date: November 5, 2021 | Michele L. Cardiff | |
Senior Vice President, Controller and Chief Accounting Officer |
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